Where Are All the New Jobs?
Why aren’t employers hiring more workers? Why are so many people seeking work unable to find anything other than part-time positions or temporary employment? And that’s when they can find a job at all.
In short, what’s causing the continuing stagnation of the U.S. economy?
Former Sen. Phil Gramm observed in the Wall Street Journal the other day that we’ve 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 economy’s 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.)
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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 out.
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 company’s future labor costs will be. Or its building and facility costs. Or its cost of capital. Or its taxes.
What’s 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), don’t 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. Boeing’s 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 don’t 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 exhale.
As for the cost of financial capital, what is going to happen is anybody’s 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 doesn’t 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 next.
Good post. You are right, John. It does boil down to common sense.,
Clever song.
As a small business, I am trying to hire people right now, and having a tough time. SO many of them prefer to collect unemployment, which is my biggest competitor.
Excellent post. You’ve hit the nail squarely on the head.
I have a BS in chemistry and a MBA in healthcare,I am currently job hunting, I was job hunting 3 months before I was laid off due to position elimination. I have been looking everywhere and finding jobs I know I can do but I am not getting any callbacks. IT seems as if employers is looking for specific experiences and will not consider the fact that some skills are transferable. I also think that employers are not up for people learning on the job as before.
Nice, persuasive summary. We should expect some job expansion in areas favored and subsidized by Obama – health care and renewable energy – assuming Congress doesn’t reverse course after 2012. Still, I am worried about Hilaire Belloc’s argument in The Servile State (1913): we’re heading for a pyramid of rich owners at the top, a layer of well paid skilled workers in the middle, and a huge number of those unemployable at anything above base level at the bottom. More and more of our commodity-level products are made by foreigners and robots, while the govt pays people more in UI benefits. How will the one-time entry level workers become upwardly mobile?
The same concerns about weak sales and an uncertain economic outlook that depress job creation also undercut the desire to fill openings. We live in a time of extraordinary uncertainty about government policy with respect to taxes, health care, financial regulation, monetary issues, environmental regulation, and other areas. The political impasse over the federal debt ceiling further muddles the outlook. Policy uncertainty discourages investment, job creation and hiring.
Full article by University of Chicago professor, Steven J. Davis.
Where are the jobs? Sitting on the shelves awaiting the 2012 elections to see that Obama is ousted. It is he, Obama, who is the existential threat to America. He is the virtual “Sword of Damocles” as Cicero described, hanging over the heads of all of America. The sword that threatens to bring down our entire civilization. He is either a complete fool, an idiot or a bold marxist in disguise as the Manchurian Candidate come to life. Either way Obamacare and the NLRB threaten industry so badly that no jobs will be offered until the entire administration is tossed out on its heels. As Van Jones likes to say, “Top down, bottom up and inside out.” That’s what the conservatives must do with these radicals who are ruining America as we know it. Hope and Change? I think not. The Jackass must be sent back to the barn.
Marti Settle
Look at where capital has moved. The “job creators” who have all of the capital are not creating jobs because there is no capital left in the hands of the masses once they meet their most basic needs, if they even can. With inadequate consumer funds to purchase goods and services it is no wonder that the plutocracy doesn’t want to spring loose with funds for growth.
This is a stalemate that markets are ineffectual in addressing. It’s time for the Friedmanites to step aside and watch Keynesian public stewards get our economy moving again.
The tried and worn argument that we need to lower taxes for the wealthy so that they can have money to create jobs is specious. They already have the money and income flow. We need to INCREASE taxes so that they will be motivated to capture the deductions they would gain by spending it on new overhead, especially on the workforce.
By growing their businesses, they would gain 1) in increased valuation of their expanding businesses, 2) by putting money into the hands of the consumers/workforce, revitalizing the market, and 3) by pumping more tax funds into the government thereby funding essential infrastructure (transportation needs), education (more powerful workforce to draw on), health care (for a healthy workforce), and other needs of our society that do benefit the wealthy along with the rest of us.
Yes, much of the growth would accrue to the wealthy, but they need to leave enough funds in the hands of the source of improved productivity – the workforce – so that they could replenish the buyers in their marketplaces.
John, you are so right in everything you write here. But it goes even further in a way that is possibly even more damaging than current employers’ reticence to hire due to the uncertainties.
I believe there is a complete disruption in the free enterprise incubator, or the creative business nursery if you will. The majority of all the ideas that have created the massive economic and cultural advances for the past 200 years came from individuals who sought to improve their own lot in life, not from bureaucrats or politicos issuing government grants or monopolistic corporations trying to assure their own longevity.
Fewer Americans see “the world as their oyster” in terms of this country supporting independent thinking and financial advancement. The mentality fostered by Obama and the Leftists encourages conformity and political correctness, not innovation and independence. The goose that lays the golden eggs is being slowly stripped of its fertility, and that will not bode well for the future of our children.
I think the lack of willingness to allow new employees to learn and train on the job is also a sign of limited opportunity for upward mobility. Employers taking advantage of the fact that their current employees are taking up more responsibiilty . They are misinterpreting employee’s need for a steady paycheck for commitment to the organization, or so they want their employees to think.
@Don
“This is a stalemate that markets are ineffectual in addressing. It’s time for the Friedmanites to step aside and watch Keynesian public stewards get our economy moving again.”
Oh my. I have a feeling you are not serious here Don. Who do you think has been responsible for the current economic mess we are in, “Friedmanites”? Was it “Friedmanites” that created the Mae and Mac calamity or the bail out and “stimulus” comedies that have taken us to the brink of bankruptcy? Thanks for the humor anyway.
Uncertainty is one reasons businesses hold back on hiring and investment. A business would rather know what to expect — even if it’s a unfavorable outcome — than not know what to expect.
This is exactly why the recovery from the Great Drepession of the 30’s lasted so long. FDR was constantly experimenting with economic policy, taxation, tariffs, etc. leaving business owners wary of investing in expansion of their operations and adding jobs. Why is our recovery so slow? Go ask a business owner.
I think we might be missing another reason that businesses are holding back on hiring: they don’t have to. All of their current employees are working twice as hard in order to keep their jobs. We’ve proven that we can do more with less, if only for a while.
Let me pass along a short story.
We have joint ventured with our community hospital on a new outpatient surgery center – a 9 million capital outlay that will create 75 to 100 jobs, most well paid and good benefits. It took us a year to get through our city code review and review, the last to change the roofline so it could not be seen from an adjacent 4 lane road.
We completed construction and had it ready to go by mid april and ready for inspection. The first inspection found a few minor and one or two issues that were important. We had those corrected in a week or so. The state health agency gets around to their reinspection when they feel like it – about 5 weeks. You then have to meet the medicare inspections, do one case to show you are capable and get the final inspection from medicare ( they have 180 days ). Only then will medicare pay for cases there and no private insurer will pay until you are medicare certified. You must have a functioning level of staff on the payroll at the time to start the inspection process and pay them to do nothing until you are certified. The burn rate is over $25,000 a day until you can start generating revenue. We hope to complete our approval by first of August.
NOW YOU WANT TO KNOW WHY WE ARE NOT CREATING JOBS!!!!!!!!!!
Mark’s post just above might be the most interesting one here. You can pair it with this story http://boss.blogs.nytimes.com/2011/07/05/how-we-got-the-restaurant-open-for-july-4/ (note that this is the happy end to the story, see the two blog posts that precede it to see the infuriating experience of dealing with government bureaucracy).
I’m a liberal democrat – I believe in redistributing income and that a fair bit of government regulation is necessary to keep a free market economy running. But I also see the point of these authors, that government regulation frequently makes running a business cumbersome in ways that have little to do with protecting the public. So for me the question is, how do we create political structures that will tend to reduce the “friction” created by regulations while maintaining the protection they offer?
For example, regardless of whether you support medicare, given that Medicare exists I doubt that anyone wants Medicare making payments without inspecting facilities to make sure that they can actually provide the services that they will be billing for. But having a six month window in which these inspections can take place doesn’t do anything to prevent fraud or improve patient care. So do we hire more inspectors so that these inspections can take place more quickly? Or can this inspection be passed off to the private sector, which in this case appears to be freeriding on Medicare anyway? Notice how private insurers won’t pay for procedures until the surgery center has Medicare certification. If Medicare didn’t exist these insurers would presumably find other ways to inspect surgery facilities that would also probably take more time that the above commenter would like – as it is Medicare does it for them for free. Would those private inspectors be as reliable as public sectors inspectors? It might be helpful to remember the incentive structure of the credit rating agencies (a kind of private inspector) helped create the current crisis.
Its also worth noting how many of these complaints are about local and state government.
Interesting theory.
But job growth this cycle has actually been stronger that at the comparable point in the early 200s recovery
before anyone had ever heard of the problems you are listing.
This data directly contradicts your theory.
The second way to apply for Medicare is to apply right onilne.a0 You will need to go to the Social Security website, click on the Medicare tab and you will see a link that says apply for Medicare benefits.a0 This process is so much more streamlined and much QUICKER!a0 First of all you will not have to navigate the phone menu for Social Security, and you will also not have to make an appt to go into the Social Security office.a0 The application will start processing immediately so you will receive your Medicare benefits much faster.Source: medicare-plans.net
Gagner de l’argent avec la bourse en ligne et gagner de l’argent avec l’option binaire c’est tres simple.