2011-07-17 13:36:12 UTC
Why arent employers hiring more workers? Why are so many people
seeking work unable to find anything other than part-time positions or
temporary employment? And thats when they can find a job at all.
In short, whats causing the continuing stagnation of the U.S. economy?
Former Sen. Phil Gramm observed in the Wall Street Journal the other
day that weve had recessions before. But at this point in the cycle we
should be roaring back. Had we followed the pattern of the previous 10
recessions, almost 12 million more people would be employed right now,
producing additional goods and services worth more than $8,000 for
every household in America.
So what gives?
Job Creators Alliance (JCA) is an alliance of business leaders who are
focused on this very issue. These are employers who are in the
trenches, facing the economys woes day in and day out. Two of them
told Fox Morning News last week that the reasons for slow job growth
boil down to basic common sense. (Fair disclosure: my wife Jeanette is
the director of the organization.)
Think of it this way. When an employer hires a full-time worker, the
employer thinks of the relationship as long term. During an initial
training and learning period, the employer probably pays out more in
wages and benefits than the company gets back in production. But over a
longer period, the hope is to turn that around and make a profit.
When employers hire new employees, then, they are making a gamble. They
are betting that over time, the economics of the relationship will pan
The problem in the current economy is that hiring new workers and
committing to new production has become extremely risky. As the JCA
folks explain, an employer who hires workers today has no idea what the
companys future labor costs will be. Or its building and facility
costs. Or its cost of capital. Or its taxes.
Whats causing all this uncertainty? You guessed it. Nobody knows what
is going to happen in Washington, D.C.
Take the cost of labor. The Affordable Care Act (what some people call
ObamaCare) is designed to force employers to provide full-time
employees with comprehensive health insurance in less than three years.
While the goal may be admirable, the consequences are not. Although no
one knows how much this extra burden will cost, estimates are that the
required family coverage will reach $15,000 a year or more the
equivalent of an additional $6 an hour minimum wage.
Employers could decide to drop their health insurance altogether; and
if they do so they must pay a fine of $2,000 per employee per year. Yet
if a lot of employers do this (and apparently a lot of them are
thinking about it), dont you think the federal government will respond
by making the fine a lot higher?
Then there is the National Labor Relations Board (NLRB). After the
aircraft maker Boeing spent $1 billion building a new plant and hiring
1,000 workers in South Carolina, the agency brought a halt to the whole
thing, calling it an unfair labor practice. Boeings sin? South
Carolina is a right-to-work state. The company should have built the
plant in Seattle, where it would be required to use union labor.
There is more bad news. The NLRB is considering rule changes that would
make it much easier to unionize workers. Would you like to see
employers across the country facing the same kind of turmoil state
governments are now facing in dealing with public sector unions? Most
employers dont relish that idea either.
Under the Obama presidency, the NLRB has made a radical change of
direction. Some would say it is much more pro-labor, but this is a
misnomer. What the agency is dedicated to is not labor, but making
labor more costly.
As for capital investments such as new buildings and new equipment,
here again there is considerable regulatory uncertainty. It should come
as no surprise that the Obama administration is overly friendly to
environmental groups who see carbon dioxide emissions as pollution. Yet
every act of production emits carbon dioxide. You even emit it when you
As for the cost of financial capital, what is going to happen is
anybodys guess. When the Bush tax cuts finally do expire, the tax on
capital gains will increase by a third and the tax on dividends will
more than double. The administration has made no secret that it would
like to accelerate these tax increases and make them even higher.
Bottom line: even if there were no Republican opposition in Washington,
we would be in trouble. The Obama administration is profoundly
anti-labor. It thinks it is pro-labor, of course. But that is because
it is so naïve about economics that it doesnt understand that when you
make hiring more costly there will be less hiring.
But there are Republicans in Washington, and (ironically) their
presence in some ways adds to uncertainty. While the two parties are
battling, who knows what the outcome will be? No one can.
So the best strategy from a business perspective is to sit on cash,
delay the employment of labor and capital and wait to see what happens
John C. Goodman is president and founder of the National Center for
Policy Analysis, a free-market think tank established in 1983.