Monday, February 10, 2014

Why Hire Anyone?

The main impediment to economic growth is the lack of job creation.  So why no job creation?

Jobs are created by businesses.   There is a limit to how many jobs there are in government since ultimately someone has to pay the tab for government jobs.  An increasing government sector, of necessity, can only be funded by taking resources away from the private sector.  That is a process that has been accelerated in recent years.

So, why are private sector businesses reluctant to hire?  This is a question that Janet Yellen and other Obama economists never seem to ask themselves.  Their view is that "inadequate demand" is the answer and, somehow, sinking the US into even more debt is the answer.  I suppose they think that hasn't been tried anytime recently.  The Krugmans, Yellens, and their kindred in academia think that business operate like robots.  As "aggregate demand" rises dues to government spending and expanding fiscal deficits, employment skyrockets.  Why isn't that happening?  Government debt as a percentage of GDP has never been higher.  How long will this empty theory persist in the minds of the Krugmans and Yellens.

A simpler explanation is that businesses are terrified at the idea of expanding their workforce.  That's what surveys of business folks tell you.  They are also concerned that making profits is viewed as evil by the media and the White House.  You might become one of the hated "one-percenters."  After all, that is the ultimate goal of a businessman who offers employment to others.  His/her goal is to become a one-percenter.  But, that puts you in the media spotlight and makes a you a target of the media.  Why not keep a low profile?  Cut back on your labor force.  Avoid the worse penalties imposed on business by the "Affordable Care Act," by dumping your work force into the exchanges.  Outscource as much of your business as you can to avoid the incredible US regulatory burden facing any employer with the temerity to add to their workforce.

The US culture and value system has changed.  Being a businessman, trying to make a profit, is considered an "Al-Capone" type activity.  Watch TV and the movies.  How are businesses portrayed?  They are always evil, willing to pollute the environment, poison their customers...anything to make a buck.  More and more Americans view the private sector through this lens.

So, why are businesses reluctant to hire.  It is pretty clear that any way to avoid an additional employee is a path that any rational businessman/woman would choose to take.  This is a predictable outcome for the policies that the US has embarked upon in recent years. 

Imagine a law that said that you must either pay every employee 40 percent more than you paid them last year or fire them.  Otherwise you, as an employer, are violating federal law.  Is that the kind of law you would support for yourself as an employee?  I don't know anyone who would favor that law if applied to themselves.  But to the poor and unskilled, that law is being promoted as fair and having no impact on employment.  That is the proposed minimum wage law increase, except that instead of applying to everyone, it exempts everyone except the poorest and least skilled Americans.  All of this in the name of fairness.

Don't expect employment growth to improve.

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