Is Our Unemployment System Broken?

My partners and I frequently get calls from clients who are trying to hire, but find that many qualified candidates are collecting unemployment benefits and do not want something like a job getting in the way of these benefits.  The conversation goes something like this "We really like this person and want to hire them.  Tell me how I can pay them so they can continue to collect."  Of course we tell the client that can't be done, and that participation in any kind of scheme like this would be  fraud, with most serious consequences.  Although many unemployed people are desperately searching for employment, and willing to take almost any job,  there are many who are thrilled to stay home and collect benefits.

I know that this is not original thinking, but it seems that this situation is representative of the problem with our unemployment system, that is, it gives able and employable people incentive to not work.

Rather than paying the unemployed not to work, why not give the money to private industry through a tax credit, with the requirement that it be used to hire the unemployed?  Perhaps the credit could be a dollar for dollar match where half of the wages came from the government and the other half from the employer.  This would effectively double the amount of money available for the formerly unemployed, because the employer would effectively be paying half of the employee's wage.  Taking it one step further, the wages paid to this class of employee could be exempt from payroll taxes for a limited period of time, say one year.  After all, no payroll tax is being paid on the money that the unemployed are paid to stay home.  In New Jersey, weekly unemployment benefits range from $300 to $600.  This money could be put to much better use paying people to work rather than to stay home.  It could be the economic stimulus that our economy needs.  Because more people would be working, productivity would increase, and the employers would be profitable, because half the wages are paid by tax credit, and are exempt from payroll tax.  The result of these additional profits would be increased tax collections, which would contribute to deficit reduction.

I suspect that my idea will be dismissed by many, who can identify a multitude of reasons why it cannot work.  Perhaps many critics will be those on the receiving end of unemployment benefits, I don't know.  And maybe my numbers don't work, but I don't think anyone will dispute the fact that if someone is paid not to work, then that is exactly what they will do.

Do you agree?  Please let me know.  Your comments, both positive and negative, are welcome.