How to Spur Hiring?

by Dave Schuler on November 26, 2012

I’ve had a toothache for the last couple of days, am on pain meds (a very great rarity for me), and am a bit out of it. I’ve got a dentist appointment later today and I expect the whole thing to be resolved one way or another in the next day or so.

While that’s the case I want to put a topic on the floor. What policies can be adopted that will spur hiring? My interpretation is that the position of the Obama Administration is to spur hiring by a combination of subsidies to encourage the specific businesses that receive the subsidies to hire and ordinary Keynesian pump-priming via what are broadly referred to as “infrastructure spending”. Whatever your ideological or philosophical position I think you’ve got to acknowledge that what’s been done to date has been inadequate. There are still at least 15 million people who are unemployed and underemployed plus the additional millions who’ve given up looking for jobs and, consequently, no longer are counted in the official reckonings.

If you think that the only problem with those policies is that not enough has been spent, I think there’s another question you’d need to address. Isn’t there some level of government spending that actually results in reduced total economic activity? That has, in fact, been the case in every fully planned economy like Soviet Russia or pre-1979 China. Government spending at one level or another accounts for about 40% of GDP right now. What’s the level of government spending at which it becomes counter-productive. Clearly, something between 0% and 100%. 40%? 60%?

The policies I’ve advocated here have been very much the opposite of what has been adopted by the Obama Administration. I think we need to encourage more business investment, more new business formation, and more hiring by removing the barriers and disincentives to them. Measures that might be adopted that I’ve suggested in the past include abolishing the payroll tax and corporate income taxes (and, presumably, FUTA as well). I’ve also suggested encouraging the states to produce a common set of regulatory requirements, analogous to the UCC, to reduce the overhead that businesses, particularly small businesses, face.

I also think that we need to encourage freer trade in a very hardnosed manner. I’ve suggested reciprocity under the assumption that countries that export to us are more dependent on us than we are on them. I’m not under any illusion that’s the case with all products and services so, clearly, no blanket policy is possible. I’ve also advocated abolishing our agricultural subsidies on economic efficiency grounds. I’ve also advocated immigration reform to emphasize economic efficiency which would really be a drastic change from present policy.

What else should we be doing? Or not doing?

{ 35 comments… read them below or add one }

Mark November 26, 2012 at 11:08 am

Yes, get rid of the payroll tax and replace the it with a value added tax to fund SS & Medicare.

Janis Gore November 26, 2012 at 11:31 am

Fire the people who aren’t doing their jobs and replace them with someone who will.

Drew November 26, 2012 at 12:18 pm

I’d comment, but I’ve been citing uncertainty and the effect of taxation on investment decisions for so long I have a headache………no one is listening. All apologies to the Average Joes on behalf of the elites.

Dave Schuler November 26, 2012 at 12:19 pm

Unfortunately, once an organization reaches a certain size 90% of all employees will be doing the bare minimum to get by (in some instances even less). There’s no theory to support that. It’s an empirical finding. I read the study long, long ago and it made quite an impression on me at the time but I’m too fuzzy right now to dredge it up.

steve November 26, 2012 at 12:22 pm

The problem goes beyond regulations and taxes. Sure, go ahead and reform regs, especially for small businesses. Make them more uniform, if you can get it past the states’ rights advocates. Do away with the corporate income tax. All of those things should help some, but we had low unemployment and good “growth” with higher taxes and a stricter regulatory environment. (We used to control prices/production for transportation, energy and even beer.) Our problem is that we have only been able to achieve “growth” with large increases in credit. At this point I really dont know how good we can be anymore at growing without ever increasing levels of private debt.

Steve

Janis Gore November 26, 2012 at 12:44 pm

I hope you feel better. I had an impacted wisdom tooth in my youth that nearly took me out. The only thing that comes near is an ear infection. Broken bones makes me nauseous, but not for long.

Janis Gore November 26, 2012 at 12:56 pm

“nauseated”. I knew as soon as I hit publish.

Janis Gore November 26, 2012 at 12:57 pm

A veritable Merlin, you are.

Janis Gore November 26, 2012 at 1:00 pm

Drew, go watch this:

http://youtu.be/EmH4YlNdWAg

Janis Gore November 26, 2012 at 1:12 pm

Ain’t that fun?

PD Shaw November 26, 2012 at 1:12 pm

Regulation is the only area of personal experience I can drawn on which I continue to see future jobs lost. Projects that do not advance because the regulations are either too rigid or too uncertain to justify the investment.

Since Obama was re-elected, we can expect to see the most significant expansion of environmental regulation in at least a generation. If the first term is any indication, more than a few of these will be adjudicated to be unauthorized executive power grabs. But mainly, Obama avoided criticism for policy in this area, by delaying action until after the election and by not mentioning issues like “climate change” until his acceptance speech.

Dave Schuler November 26, 2012 at 1:19 pm

At this point I really dont know how good we can be anymore at growing without ever increasing levels of private debt.

My answer to that is that we must end distortive malinvestment.

Janis Gore November 26, 2012 at 1:20 pm

I still think it comes down to people with the capacity to study and who want to work.

I needed a few more plants to round out my flower plantings, and talked to Kathy Young again on Sunday, the manager I praised to the Dennis Stine, of the chain family.

She said the way to improve the nurseries in the chain is to employ ex-nurses, because they are used to taking care of things. (Hey, Jan.) She likes for all her plants to go home.

Janis Gore November 26, 2012 at 1:43 pm

Doen here in Louisiana, we have something called “lagniappe”, which translates into something akin to “a little extra.”

I’m off Dallas coming weekend, and I wanted Tangee lipstick and “Tuckered and Tired” bath salts for the couple who will house me (my sister and Harley-riding fraud-detective husband. (She’s 62 now.)

The Ortons offered a Vermont Country Store tin on their website for a $10 contribution to the United Way for the relief of Sandy victims. Sandy is a project of mine.

Just a few minutes ago, my order arrived. It is a large tin:

http://www.flickr.com/photos/gonesouth/8220896719/in/photostream

With a letter inside:

http://www.flickr.com/photos/gonesouth/8220897981/in/photostream

And that’s service. You know all about it, Dave and Drew.

I placed that order on Friday.

steve November 26, 2012 at 1:46 pm

“My answer to that is that we must end distortive malinvestment.”

Absent that, we had essentially no growth in the 2000-2007 period. Really, this goes back to the late 70s early 80s. Does anyone in business know how to exist, let alone grow, anymore except with massive debt financing? Besides the investment side, what happens if consumers stop maxing out their credit?

Steve

Dave Schuler November 26, 2012 at 1:57 pm

Absent that, we had essentially no growth in the 2000-2007 period. Really, this goes back to the late 70s early 80s.

Pretty much what I’ve been saying for some time although I’d put the time we started down the wrong path a little later—say, the late 80s or early 90s.

Unfortunately, a lot of the policy of the last several years has been concentrated on trying to pump up some of the sectors in which we’re overinvested. Those include the financial sector, housing, and auto manufacturing. Keep in mind that the world auto production capacity is higher by a multiple than the world consumption of autos and China and India, just to name two, are adding to that capacity on practically a daily basis.

And healthcare.

I’m not insane (appearances to the contrary notwithstanding). I recognize that we’ve got to restructure our economy gradually. But allowing relatively non-productive assets to be refactored into more productive areas does not seem to be the objective of policy.

Janis Gore November 26, 2012 at 2:19 pm

More vocational programs, more independent study. We have the resources now.

This is a drum that john personna bangs at OTB. We are no longer dependent on institutions, per se. We can make our own choices and act independently.

By the way, I took my mother-in-law a lovely poinsettia from Walmart this morning. $10 something from Walmart. I’ll take her facility a boatload of satsumas when I can cut them. It’s rainy today.

Janis Gore November 26, 2012 at 2:19 pm

The trees cost $15 new.

Janis Gore November 26, 2012 at 2:21 pm

We have a hierarchical, constipated, institutional framework hobbling us here.

Janis Gore November 26, 2012 at 2:23 pm

Maybe everybody’s just too damned old and instilled with old ways. Hand me that dirty vodka with the anchovy olives, please.

Janis Gore November 26, 2012 at 2:26 pm

My MIL might be losing her mind, but she gave me her firstborn, and for that I will be eternally grateful.

Janis Gore November 26, 2012 at 2:44 pm

Everbody wants to be top dog. (Thats’ intentional, hon.) Where I worked the top dog ran the sleigh, and that’s screaming hard work.

Janis Gore November 26, 2012 at 2:46 pm

Steve knows.

Janis Gore November 26, 2012 at 2:52 pm

I know. I’m an employer. I work with black people everyday who want to do a little better. The guy who does my yard. The guy who did the roof. The woman who will take care of the birds for a pittance because I treat her like a lady.

Damn, y’all. Our system is screwed.

Janis Gore November 26, 2012 at 3:10 pm

The only way I know how to do it is to keep the Christian commandments.

Janis Gore November 26, 2012 at 3:18 pm

I’m wearing a Coptic cross from Dawn’s at overstock. It cost $18.

I have a pretty crystal one from there, too. About the same.

Janis Gore November 26, 2012 at 3:20 pm

Stop prosylitizing, Janis.

Janis Gore November 26, 2012 at 3:31 pm

I want misanthropes, misogynists and racists ground to dust.

steve November 26, 2012 at 3:46 pm
Dave Schuler November 26, 2012 at 3:53 pm

I interpret your graph a little differently. The sharp decline begins around the time I said–early 90s. It was rising through the late 1980s. As I see it most of the slow decline from the 1960s through 1980 can be attributed to slowing GDP growth alone.

Jimbino November 26, 2012 at 5:58 pm

To me it’s quite obvious why folks are unemployed while employers struggle to find qualified workers:

1. The minimum wage, which discourages hiring and working, just as a minimum sale price would on Amazon or eBay.
2. All payroll taxes, especially those that are a form of insurance, like FICA, unemployment insurance and workers’ compensation insurance. Folks who want them are indolent, pregnant, hypochriandiacs, and females. The single, child-free young male (even sterile female) will work for $$$ instead.
3. Offer of benefits in lieu of wages, for the same reasons: The single, child-free young person wants $$$ instead, having little need for group health insurance, which is exploited overwhelmingly by breeding hyprochrondriac females.
4. Drug-screening policies. Supposedly, 80% of employers require drug-screening, which is a good way to keep libertarians looking elsewhere, or going Galt, and probably kill off employment in Washington and Colorado!

Janis Gore November 26, 2012 at 6:22 pm

The problem is that you have to earn that 40-50 thousand cushion somehow. With the bubbles and crap that have gone on in the past several years, nothing will.

Janis Gore November 26, 2012 at 6:24 pm

God help me, I ‘m looking at savings with ING. They give a savings account .75. My CD’s earn less than .50.

Janis Gore November 26, 2012 at 6:26 pm

My late husband erased the game when I could beat him at it.

Andy November 26, 2012 at 8:33 pm

These are all good ideas, but I think they are mainly nibbling at the edges. Maybe if everything was implemented then things would improve over time. Add government reform to the list. The federal government, particularly the DoD, still operates on outdated industrial model. We need a modern equivalent of the 1947 NSA. But that’s a marginal improvement too….

All of those things should help some, but we had low unemployment and good “growth” with higher taxes and a stricter regulatory environment.

Yes, all things being equal…. However, I’ll disagree on the regulatory environment depending on what you mean by “stricter.” Maybe finance and some other areas are less strict, but in most other areas regulations are more complex, expansive and stricter than they used to be. Some examples off the top of my head – environmental regulations, employment, safety, building codes, tax compliance, etc. Add Obamacare’s effect on employer-provided health care benefits and there’s another one.

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