Jobs Creation and Uncertainty
Quite a few analysts, government officials and writers are scratching their heads wondering why flooding the economy with cheap dollars isn’t translating into job growth.
It’s kind of silly on their part, since all they need do is ask any large or small businessperson. There are two glaringly straightforward answers: one the economy is in a shambles, a malady that only time can cure; two, uncertainty and unpredictability abound at almost every turn.
Quite simply, in order to add productive capacity, whether through plant investment or additional manpower involves risk. The investor must be able to calculate the cost and predict the yield. All of you small business owners know how difficult those calculations are at this time, and they are even more difficult for larger companies that have high fixed investment costs.
The problem lies with government regulation and taxation. Health care, energy costs, taxation, and regulation have never been as uncertain or incalculable as they are right now. Take mortgage lenders as an example, faced with unprecedented price risk, contract risk through cramdown, and constantly changing appraisal rules, they are hardly in a position to calculate cost/yield on a single home, let alone industry trends in order to determine the need for more or fewer employees. Couple that with the problem that government health care discussions are running the gamut from forcing companies to purchase insurance for every employee, to taxing those benefits, to creating a new insurance entity, and it becomes impossible to calculate risk/reward for a new hire, let alone current staff. Even a small restaurant can’t be certain what future employee costs may be.
Given uncertainty, it shouldn’t be a head scratcher that many companies aren’t considering hiring, and are in fact axing or outsourcing every non-critical position they can. With the government on the change tirade, every employee, every lightbulb, every unit of production is potentially as much of a liability as an asset. In many ways, predictability is more important than the actual rules themselves.
Unemployment won’t be reduced and the economic recovery cannot begin until some degree of certainty is restored. Once the rules are in place, business can begin moving forward and return to an offensive rather than defensive posture. Bad economic decisions at the government level can and do destroy jobs, but uncertainty is at least as destructive. Unfortunately, uncertainty is the order of the day.
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Larry Henson, President In Business Since 1974 405-471-4888