- Government, advocacy groups, and the media pressure employers to hire candidates based not purely on merit but also on race, ethnicity, gender, and age. For example, courts are increasingly using the "disparate impact" standard to judge racial discrimination. If, for example, a smaller percentage of African-Americans pass an employee-selection test, even if no test items were evaluated to be biased against African-Americans, the test's disparate impact on African-Americans would be legally admissible evidence that the employer was discriminatory. Being pressured to hire on non-merit-based criteria, of course, reduces employers' desire to hire at all.
Government has vastly increased the dollar and human costs of hiring people. Of course, there are the employer-paid payroll taxes: unemployment tax, Medicare, Medicaid and half of Social Security plus all the associated paperwork. But mandates such as the Family Leave Act, which allows workers to take up to 12 weeks of leave every year(!) with guaranteeed rights of return, imposes onerous demands on employers. And President Obama has proposed making that leave paid! And for the coup de gras, health care cost, already a huge employer expenditure will grow far larger under ObamaCare, under which employer taxes will be used to subsidize the poor's health care. Living-wage laws, for example, those in San Francisco, require employers to pay all workers $11.54 an hour (usually plus benefits). Employers who could use an employee that would add any less value than $11.54 an hour plus benefits won't hire anyone at all--few employers want to take a loss in hiring an employee.
- The hassle factor. Many American employees, especially in liberal cities, and especially young employees, feel a sense of entitlement and litigiousness. They view employers as necessary evils. Many employers find the hassles of dealing with such employees outweigh the profit they would generate.
- Increased government worker protections create yet more disincentives to hire. For example, California law requires that even if a non-exempt worker works only four days a week, if an employer wants an employee to work a 9th hour on even one day, the worker must be paid 50% more for that one hour. Another example: sexual harassment laws have been so liberalized that, for example, if a person merely perceives a coworker to be making unwanted advances or is offended by a photo of a sexily-dressed person in an employee's cubicle, s/he could have grounds to build a case against the employer for condoning a "hostile environment," even if the employer was unaware of the photo!
Those are potent reasons why employers are ever more likely to not hire U.S. employees but rather to offshore or automate jobs, or simply to calculate that there's too little profit to justify the disadvantages of hiring. And to the extent hiring is necessary, employers are ever more often hiring workers on short-term contracts to reduce payroll costs and the risks of lawsuits.
- It is very difficult to fire an unsatisfactory employee, especially if the employee is in a "protected class:" woman, minority, person over 40, person with a disability (everything from cancer to depression.) Many such employees file wrongful termination actions and the rate is growing. Those suits are not only costly and can take many years, they take a great psychological toll on employees being accused of or deposed about alleged racism, sexism, ageism, or a hostile environment.
- The overall cost of regulation is enormous. A study by California State University economists reported today by Governor Schwarzennegar finds that the regulations cost the average small business and $134,000 every year, a total cost of $493 billion and 3.8 million jobs. And, of course, President Obama is calling for yet more regulation.
Time magazine proposes the typical liberal solutions that have already been tried and failed: funding colleges more and job retraining. We already have the highest percentage of college graduates in American history and as discussed earlier, employers are yawning at them because all we've done is taken weak high school students, lowered standards in college, but radicalized them to demand the moon from employers. So employers offshore, automate, or temp as many positions as possible. Regarding job retraining, it's been tried and tried, and those federal training programs fail: cost a fortune per trainee and most trainees don't land a job in their new career or don't last.
In my view, two changes would have the biggest long-term impact on decreasing the unemployment rate:
Training more entrepreneurs, starting in elementary school. That would yield more successfully self-employed people, more new ideas for products and services, which would create the need for more employees.
Freeing business from most government regulation.