This morning, Mark Zandi, chief economist at Moody's Economy.com, has an op-ed in the New York Times "Help Small Businesses Hire Again." He argues that more needs to be done to ease the credit crunch facing small business and to promote job sharing in small businesses as an alternative to layoffs. Both of these are excellent suggestions. Let me add two extensions to those ideas: improving credit flow by monetizing intangibles and increasing worker training through a knowledge tax credit or training subsidy.
On increasing credit, I will refer you to the report we published yesterday Maximizing Intellectual Property and Intangible Assets: Case Studies in Intangible Asset Finance (also in pdf version). That report looks at the emerging new means of financing innovation based on intangible assets in public, private and venture capital markets. Intangible assets have become a valuable asset class. In response, firms specializing in intangible-based financing are springing up, using them to raise capital for the next round of innovation. The paper details equity, equity-debt, debt, and sale-leaseback transactions, both private and public, that have helped companies raise capital, based on careful, rigorous analysis and conservative underwriting standards. The paper also touches upon what can be done to promote these financial tools, including recommending that SBA work with commercial lenders to develop standards for using intangible assets as collateral. By better understanding and utilizing intangibles assets as collateral, SBA could quickly and safely increase the flow of credit to small businesses.
The job sharing idea is especially interesting. Small businesses have a different level of intangible assets in their workforce. In a small business, key skills are more likely to be concentrated in a few employees, simply because there are fewer of them with fewer opportunities to have multiple people with the same skill sets. Loss of that concentrate firm specific knowledge can be more harmful to a small business than a larger one. Retaining those skills is critical for future growth. In addition, as Zandi notes:
We can tie training to job sharing in two ways. The UI payments could be greater if the worker is in training during the "shared" hours. As either an alternative or in conjunction with UI payments, the companies could be given a tax credit for the cost of the training -- for both direct costs and the payroll cost of those workers participating in the training. The program could even be taken a step beyond a tax credit. As with a recent change to clean energy tax credit, the tax credit could be front loaded by either offering payments in lieu or allowing monetization of the tax credit in the financial markets (see earlier posting). This way, small businesses would get the money as they need it to pay the workers in the training program.
Importantly, the training need not be off-site. On the job training at the small business location should be covered as well.
In this way, those "lost" hours from job sharing aren't lost at all. They are an investment in future growth. The knowledge credit covers both the short term problem of maintaining incomes in a downturn and the long term problem of improving skills needed to maintain competitiveness.
On increasing credit, I will refer you to the report we published yesterday Maximizing Intellectual Property and Intangible Assets: Case Studies in Intangible Asset Finance (also in pdf version). That report looks at the emerging new means of financing innovation based on intangible assets in public, private and venture capital markets. Intangible assets have become a valuable asset class. In response, firms specializing in intangible-based financing are springing up, using them to raise capital for the next round of innovation. The paper details equity, equity-debt, debt, and sale-leaseback transactions, both private and public, that have helped companies raise capital, based on careful, rigorous analysis and conservative underwriting standards. The paper also touches upon what can be done to promote these financial tools, including recommending that SBA work with commercial lenders to develop standards for using intangible assets as collateral. By better understanding and utilizing intangibles assets as collateral, SBA could quickly and safely increase the flow of credit to small businesses.
The job sharing idea is especially interesting. Small businesses have a different level of intangible assets in their workforce. In a small business, key skills are more likely to be concentrated in a few employees, simply because there are fewer of them with fewer opportunities to have multiple people with the same skill sets. Loss of that concentrate firm specific knowledge can be more harmful to a small business than a larger one. Retaining those skills is critical for future growth. In addition, as Zandi notes:
Nothing damages morale at a company more than layoffs; the experience not only is crushing for those who lose their jobs, but also weighs on those who remain, including managers. Layoffs are also costly, given severance expenses and the costs of rehiring or training new employees when business picks up again.Under his proposed job sharing plan, workers would reduce hours with portion of the workers' lost wages covered by unemployment insurance (UI). But why should those workers simply remain idle? As I've said before, lets have them sitting in a classroom rather than standing in an unemployment line.
We can tie training to job sharing in two ways. The UI payments could be greater if the worker is in training during the "shared" hours. As either an alternative or in conjunction with UI payments, the companies could be given a tax credit for the cost of the training -- for both direct costs and the payroll cost of those workers participating in the training. The program could even be taken a step beyond a tax credit. As with a recent change to clean energy tax credit, the tax credit could be front loaded by either offering payments in lieu or allowing monetization of the tax credit in the financial markets (see earlier posting). This way, small businesses would get the money as they need it to pay the workers in the training program.
Importantly, the training need not be off-site. On the job training at the small business location should be covered as well.
In this way, those "lost" hours from job sharing aren't lost at all. They are an investment in future growth. The knowledge credit covers both the short term problem of maintaining incomes in a downturn and the long term problem of improving skills needed to maintain competitiveness.
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