When President Obama convenes his jobs summit Dec. 3, one of the job-creation proposals likely to be considered has been advanced by ILR School Professor John H. Bishop, who discussed his proposal in a Nov. 19 column in The New York Times. An excerpt:

One idea that has received attention lately -- and which I heartily support -- is a job-creation tax credit, which would make it cheaper for employers to hire new workers.

Here's how it could work, according to the proposal I wrote with Timothy Bartik of the Upjohn Institute: Employers would have to expand their total payrolls to qualify for the credit to prevent companies from simply firing and rehiring people. They would then receive a 15 percent rebate on any increase in their 2010 wage bill over their 2009 level and a 10 percent rebate for the increase of their 2011 wage bill over the 2009 wage bill.

We estimate that this temporary credit would increase employment by 2.8 million positions by the end of 2010 at a cost to the federal government of less than $6,000 per full-time equivalent job.

The credit could be an extremely cheap, efficient way to bolster the job market, especially relative to some other proposals, like public works projects. The credit accomplishes so much so quickly because it enables the private sector to figure out which jobs make sense for the long run. Crucial decisions are radically decentralized to the 6.5 million employers who would pay 85 percent of the cost of taking on new workers and who would select, train and supervise the new hires. The employers define the purpose of their firms' expansions.

A similar two-year temporary credit -- called the New Jobs Tax Credit -- was established early in 1977, and studies have found it successful.

One particularly impressive part of the policy's track record is that employment did not collapse when the tax credit ended. For 15 months, unemployment remained stable and the employment-population ratio stayed at its up-to-then record level.

The implication of these trends is that, eventually, firms were going to expand and hire new workers. The tax credit probably motivated some of these employers to expand earlier, ushering in a faster jobs recovery.

What does the success of the tax credit in 1977-78 imply about the likely impact of a new credit now?

The current pool of underutilized labor and capital is huge, much larger than it was 33 years ago, so we expect the proposed credit for 2010-11 to have a much larger impact on employment.

Some might argue that a 15 percent discount on a new hire won't be enough to encourage employers to take on more workers, because companies might still feel demand for their goods and services is too weak to justify expansion.

We expect demand for the products and services the extra workers produce to come from four sources:

Roughly two-thirds of all employers will grow enough to earn a job-creation rebate. These rebates will improve cash flow and stimulate demand for raw materials and supplies used to make finished products. Labor-intensive expansions will require less borrowed capital, so banks will be more willing to help with financing.

The credit lowers the cost of having American workers provide a service or make a product. As a result, American firms will be more competitive as exporters and as domestic suppliers.

The temporary 15 percent reduction in the marginal costs of labor at so many companies will temporarily reduce prices and improve the quality of services provided. Both of these responses increase the demand for real output -- and the workers who produce it.

Temporary tax credits for job creation make it cheaper for companies to invest in labor-intensive expansion. It's like putting workers on sale for two years. And the policy imparts a very motivating message to companies: Don't wait until after the economy comes roaring back. Hire now the talented people you could not attract in 2007. Get a jump on your competition.