Michael Fleischer, President of Bogen Communications Inc., places before mankind the common sense of why business is not hiring, in terms so plain and firm as to command their assent:
Meet Sally (not her real name; details changed to preserve privacy). Sally is a terrific employee, and she happens to be the median person in terms of base pay among the 83 people at my little company in New Jersey, where we provide audio systems for use in educational, commercial and industrial settings. She's been with us for over 15 years. She's a high school graduate with some specialized training. She makes $59,000 a year—on paper. In reality, she makes only $44,000 a year because $15,000 is taken from her thanks to various deductions and taxes, all of which form the steep, sad slope between gross and net pay.
Before that money hits her bank, it is reduced by the $2,376 she pays as her share of the medical and dental insurance that my company provides. And then the government takes its due. She pays $126 for state unemployment insurance, $149 for disability insurance and $856 for Medicare. That's the small stuff. New Jersey takes $1,893 in income taxes. The federal government gets $3,661 for Social Security and another $6,250 for income tax withholding. The roughly $13,000 taken from her by various government entities means that some 22% of her gross pay goes to Washington or Trenton. She's lucky she doesn't live in New York City, where the toll would be even higher.
Employing Sally costs plenty too. My company has to write checks for $74,000 so Sally can receive her nominal $59,000 in base pay. Health insurance is a big, added cost: While Sally pays nearly $2,400 for coverage, my company pays the rest—$9,561 for employee/spouse medical and dental. We also provide company-paid life and other insurance premiums amounting to $153. Altogether, company-paid benefits add $9,714 to the cost of employing Sally.
Then the federal and state governments want a little something extra. They take $56 for federal unemployment coverage, $149 for disability insurance, $300 for workers' comp and $505 for state unemployment insurance. Finally, the feds make me pay $856 for Sally's Medicare and $3,661 for her Social Security.
When you add it all up, it costs $74,000 to put $44,000 in Sally's pocket and to give her $12,000 in benefits. Bottom line: Governments impose a 33% surtax on Sally's job each year. ...
To offset tax increases and steepening rises in health-insurance premiums, my company needs sustainably higher profits and sales—something unlikely in this "summer of recovery." We can't pass the additional costs onto our customers, because the market is too tight and we'd lose sales. Only governments can raise prices repeatedly and pretend there will be no consequences.
And even if the economic outlook were more encouraging, increasing revenues is always uncertain and expensive. As much as I might want to hire new salespeople, engineers and marketing staff in an effort to grow, I would be increasing my company's vulnerability to government decisions to raise taxes, to policies that make health insurance more expensive, and to the difficulties of this economic environment.
As Logan Penza observes:
The flat truth is no one is going to hire new employees unless there is some reasonable promise that the additional cost of the employee will be recovered through increased profits resulting from the new employee’s work. That’s not “greed”, it is bare survival in tough economic times. And all the recent additions to per-employee costs aren’t alone. There is a seemingly endless well of new possible costs coming, including new environmental regulations, the possibility of a massive new “carbon tax”, and “card check” that promises to raise labor costs even further with exactly zero (at best) increase in productivity. Vague gestures towards a few thousand dollars of tax credits to stimulate job growth don’t even begin to cover the risks.
On top of it all, if you happen to be an oil worker on the Gulf Coast, your job is politically verboten. Sorry about that. Or not.
Only a crazy person would be eager to start large-scale hiring in this political environment. Yet many anti-corporation zealots profess themselves outraged that the Evil, Greedy Corporations won’t get with the business of economic recovery.
They just don’t realize that part of the explanation lies in the mirror. The excesses of anti-corporation policy and rhetoric (which is the harbinger of future policy) is sand in the economic engine. You can’t be anti-business and then expect business to bail out the economy by expanding and investing.
PS: Bonus points for the first commenter to correctly identify the (somewhat dated) pop culture reference in the lead paragraph without resorting to Google.
Update and Hint: The pop reference is not in the lead paragraph of Fleischer's op-ed, but in my introductory paragraph. The historical reference, of course, is to Thomas Jefferson's letter of May 8, 1825, to Henry Lee. But I don't count a 185 year old letter as pop culture. Instead, the line was adapted from a musical.
