Monday, March 1, 2010

Why Any Recovery Will Be Jobless

I recently read the summary of a panel presentation of leading employment attorneys, which made clear to me why an economic recovery, assuming we have one, will be a jobless one.

Why would an employer want to hire when he must incur all of the following:
Even if an employer's intent is non-discriminatory, if an employer's decision to hire, promote, or terminate employees has "disparate impact," on a gender, racial group, or workers over 40, that may be grounds for a discrimination lawsuit against the employer.
  • Large and complicated payroll costs beyond salary: Social Security, Medicare, Medicaid, Workers Compensation, Unemployment Insurance (now up to 79 weeks,) plus various state and local levies.
  • Mandated leave: 12 weeks per year with rights of rehiring (the Family and Medical Leave Act) which may be expanded by the '"Healthy Families Act," which would mandate up to 56 hours of paid sick leave to take care of themselves or a family member very loosely defined: "anyone closely associated with an employee."
  • The Americans with Disabilities Act, in addition to adding pressure on employers to hire people with physical and mental disabilities, requires employers to provide "reasonable accommodations" for all such employees.
  • Laws granting plaintiffs lower burdens of proof regarding discrimination as well as sexual harassment. For example, an employer can be held liable for an employee's being harassed, even if the employer is unaware that the harassment occurred. The financial and human costs of defending such lawsuits are enormous.
  • The proposed health care legislation will force employers to pay for the ever escalating health care costs.
  • New legislation makes it easier for workers to organize into unions, which, of course, increases employer costs while making it often prohibitively difficult to fire even low-performing employees.
If you ran a business, wouldn't all those mandates make you want to hire as few people as absolutely possible--even if the taxpayers gave you $5,000 per? That certainly wouldn't seduce me-I'd rather stay small than endure all those burdens and increased risk of having to close down my business.

To the extent I'd have to hire, I'd feel forced to use independent contractors on a just-in-time basis, and would outsource/offshore as much as possible. I might, for example, find such workers using websites such as odesk.com, elance.com, guru.com, virtualemployee.com, ifreelance.com, and these that Tim Ferriss, author of The Four-Hour Workweek recommended when I interviewed him on my radio show yesterday: www.99designs.com, www.crowdspring.com, www.asksunday.com, and www.hiremymom.com

I believe that President Obama and the Democrats are truly trying to help employees but the inadvertent effect of their initiatives will ironically be to eliminate jobs, not create them.

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