A very natural question to ask in these days of high unemployment in the United States with no end in sight is "why aren't employers hiring?"

If you want the bottom line answer, it's because many firms are unwilling to consider adding to their employee rosters because they don't believe their future prospects are bright enough to support the cost of adding additional people to their payroll.

What is that cost? Well, you're in luck because our latest tool is designed to estimate the minimum amount of money a company would need to justify keeping you on their payroll!

What we've done is to work out the major basic costs your employer has to pay just because you're on their payroll. That includes everything from the pay you receive from working to the pay you might receive for not working, whether that's in the form of vacation, sick leave or other personal time off.

Speaking of personal benefits, let's not forget the amount of cash your employer might contribute to your retirement plan on your behalf, as well as what your employer pays to provide you and/or your family with health insurance.

We've also added in what your employer pays to the federal government because you are working for them. Things like your employer's portion of Social Security and Medicare taxes, not to mention the federal government's share of taxes to fund unemployment insurance benefits.

But wait, that's not all! There's also the taxes that an employer must pay to your state because you're on their payroll. That covers thinks like the state's portion of the unemployment insurance taxes that are intended to pay your benefits if you're laid off from your job and the state's taxes that support workers' compensation programs if you are injured while working.

And don't forget about those pesky administrative costs associated with paying you. Because it actually costs money to pay you money!

As you can imagine, the costs of just keeping you on the job can add up to be pretty substantial. If you're on the outside looking in, you can add in the employer's costs of hiring you and training you.

It's really a wonder that with all these extra costs beyond your paycheck that anyone can get a job in the first place!

Which brings us to today's problem. The costs of keeping people on the payroll and of hiring new people have been rising, which you can confirm by comparing your results for this tool with our previous generation of it!

For instance, if a business might hire significant numbers of teens at the federal minimum wage, the cost of paying just the "visible" portion of such a minimum wage earning employee has gone up by over 40% in the years from 2007 to 2010, as the minimum wage itself was jacked up from $5.15 per hour in 2007 to today's $7.25 per hour.

And if you thought that ObamaCare® might make health care insurance any less expensive, you're sadly mistaken....

So far, we also haven't looked at other potential increases the government still might add this year to a firm's cost of doing business. Not including what might happen through arbitrary regulations.

Never-the-less, our tool does provide a basic indication of the minimum amount of revenue or savings that you must personally generate in support of your employer to justify your place on their payroll. Assuming they can afford to just break even. Indefinitely.

You might have noticed a pattern that nearly every contributing cost that inflates what your employer must pay for your services, above and beyond your "visible" pay, is something that is affected or might be affected by government actions. If you've been paying attention lately, all those costs have been going up.

And that's why employers aren't doing much hiring in meaningful numbers these days. This situation will only reverse when the costs of both doing business and having people on the payroll stop rising, or better yet, start falling instead. Business owner Michael Fleischer writes (HT: King Banaian):

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.

A life in business is filled with uncertainties, but I can be quite sure that every time I hire someone my obligations to the government go up. From where I sit, the government's message is unmistakable: Creating a new job carries a punishing price.

The Obama administration's main response to the situation facing business owners and hiring managers, other than doing things that either increase their costs of doing business (see above) or that steal from the future while playing games today, is to emphasize that they're doing a lot of things to make it cheaper for businesses to borrow money.

It would seem that in their minds, the secret to creating jobs in the private sector is that businesses should take out loans and then pay interest charges on top of their increasing costs, without knowing whether they'll be able to make enough money doing business in the future to justify hiring someone new or to continue employing somebody today.

And these same people wonder why so many people have come to the conclusion that they just don't get it.

Labels: business, taxes, tool

- posted by Ironman at 6:37 AM | Permalink | Home |