Wednesday, February 24, 2010       E-mail This Story

We've been hiring for months. Most of the hiring is temporary to hire but some of the hiring is direct based on specific industry and the specific skill set required and the quality of the available and willing candidate. But in all cases the driver of hiring is increased demand for the employer's goods and services. Never in any of the hiring scenarios has there been any thought to wait for the Government to pass some tax incentive.

Now in a desperate attempt to spin the 2010 elections Congress is attempting to sell snake oil to the American people in the guise of a completely off target jobs creation bill.

The current "bill's centerpiece is a $13 billion program allowing companies to avoid paying Social Security taxes for the remainder of 2010 on new hires who have been unemployed for at least 60 days. Employers would also receive a $1,000 tax credit for each new worker who stays on the job for at least a year. Democrats tout the plan as a simple way to create tens of thousands of new jobs, though some experts dismiss it as too narrow to make a significant dent in the nation's unemployment rate."

The experts are right as far as the deminimus nature of the proposal. Even if the bill was on target it would be too little to matter. The cost benefit analysis for this temporary tax relief is also completely out of whack. Estimates are that it would cost tens of thousands of taxpayer dollars for each hire under the proposal.

As usual business people and those with knowledge of labor economics peg it better than the political spin doctors. Here's what real people are saying about the bill:

"If people aren't selling their products the way that they used to, then there is no need to have people working," said Scott Shane a professor of entrepreneurial studies and economics with the Weatherhead School of Management at Case Western University.

"I'm not going to make a decision on whether to hire or not to hire because of (tax credits)," said Jordan Kimberg, president of LetsGet.net, a four-year-old St. Louis business with 10 employees that provides online marketing strategies to local restaurants. "I'll do what is best for my business and the taxes will do what they will."

But it is not just the dysfunctional business concept in the congressional bill that is at fault. One of the most dishonest parts of the congressional game plan is the obvious attempt to make voters believe that it is employers themselves that are the bottleneck to new hiring. It is basic to business and labor economics that consumers and buyers of goods and services are the ultimate drivers of the production/hiring process. When there is no market for the goods or services employers cannot justify a new hire. The cost of hiring is high. It goes far beyond the tax issues that congress proposes to relax. For profit employers hire only when it makes business sense to hire.

So what does congress propose to do about the only thing that will drive hiring? Apparently nothing. Missing in the jobs creation debate is any serious discussion about government programs or stimulus investment to create new markets or expand markets especially in the export sector.

Labor economics is a very complicated field but if it is correct that buyer demand is the most effective and efficient way to drive increased hiring then perhaps serious questions should be addressed to our congressional representatives about what they propose government might do to invest in new markets or to remove governmentally imposed trade barriers.

What is your opinion about the jobs bills? What, if any role, should government actually have in jobs creation?

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