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Real solutions to America's jobs problem

Despite the claims of significant job creation over the past five years, the reality is that far too many Americans are unemployed and underemployed. However, in typical government fashion, proposed solutions come in the form of entitlements and taxes rather than fixes for the fundamental underlying problems.

Money transfers are, at most, a small bandage on a gaping wound. The reality is that our economy has shifted to services from manufacturing. We have many jobs vacant in industries such as technology and healthcare, but our work force isn't qualified to fill many of those jobs.



A worker heats a grinding roll for industrial coffee grinding equipment at the Modern Process Equipment Inc. (MPE) manufacturing facility in Chicago.
Tim Boyle | Bloomberg | Getty Images
A worker heats a grinding roll for industrial coffee grinding equipment at the Modern Process Equipment Inc. (MPE) manufacturing facility in Chicago.

We don't need to throw more money into the government's hands to effect change — we need to realign our focus and come up with more effective solutions. Here are three solutions that address unemployment from the concerns of both sides of the political spectrum.

Public/private retraining subsidies

Unemployment insurance is meant to be a temporary assistance to bridge a gap when someone loses a job and needs to find a new one. But when there's a mismatch in worker skills and jobs available, that becomes a long and difficult road for many. Also, in times of economic uncertainty, it becomes a riskier proposition for businesses — especially small businesses — to hire new individuals, adding to the prolonged employment recovery.

(Read more: Carol Roth: Why inequality isn't a problem)

As a solution, why not make unemployment benefits a subsidy that will help spur job growth and lend a hand to those without employment?

For example, unemployment insurance could become a skills and education-training subsidy. On a voluntary basis immediately and/or a compulsory basis after a person is out of work for a defined period — say 3 months — benefits would be used in a public-private partnership with small businesses.

The money would be used to subsidize internships or intern-to-hire programs where the individual can learn about a business while receiving pay through an unemployment subsidy. While business owners would still have to devote resources to training, they get the benefits of additional labor and the ability to test out new employees without the full financial risk.

(Read more: The surprising reason college grads can't get a job)

The unemployed individual would get paid through this interim job where they will learn new skills, get a live "audition" of sorts with a company and still have benefits to live on for the period.

This would help to spur small-business growth while allowing those out of work to supplement their skills and better their situation and resume. It changes what's perceived as an entitlement to a program with personal accountability that is a win-win for all.

Structuring a program with small businesses also helps to defray any issues of such a program being run by the government. With the private sector doing the fulfillment, if done properly, such a program would be less likely to be wasteful, more likely to ensure that workers didn't slack off and less apt to be used as a political pawn versus a legitimate attempt at helping Americans.

Obviously, such a program would have to be structured appropriately (i.e. with the input of competent business people) to ensure that the objectives were met and that unintended consequences, such as displacing existing workers, were avoided. That being said, there's no reason — other than politics and misplaced focus — that we can't come up with reasonable, creative solutions to help those who need it.

Extended UI with a loan

While a program like above makes sense, government often doesn't, and it's noted that such a program would take some time to implement. So, an easy solution to those who have expiring benefits is to create a loan program that would allow for a benefits extension for up to two years. That money would have to be paid back with a small interest rate.

This would achieve the objective during times of substantial unemployment to create an additional lifeline for those who can't find work with the accountability that they have to pay it back. Defaults wouldn't be an issue, because the payback could automatically be netted against any future benefits from the government. This creates a bridge between those who say that we need to help those in need and those who want self-sufficiency and worry about system abuse. Moreover, it could be implemented quickly and easily.

Get rid of freelancing barriers

The third change is making it easier for individuals to freelance, which means changing the definition of an independent contractor — aka, a 1099 employee. I've written extensively on why the IRS's 1099 definition is outdated and hurts small business. If businesses could hire on a contract basis and not have to incur the headaches, expenses and legal insanity that come with being an employer, we could put more people back to work by letting them take control of their own destinies as contractors. Because the self-employed pay a self-employment tax that is roughly equal to both an employer and employee contribution to Social Security combined, the tax effect should be roughly neutral on a per-person basis and overall net positive as more people transition from unemployed to self-employed.

(Read more: From brats to bosses: Gen Y to dominate by 2025)

It's time that our government fosters solutions designed to help solve problems instead of actions designed to garner votes. That's what America deserves.

— By Carol Roth

Carol Roth is a "recovering" investment banker (corporate finance), entrepreneur/small-business owner, investor and author of "The Entrepreneur Equation." Follow her on Twitter @CarolJSRoth.

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