Sunday, July 10, 2011

So, Where's The Mystery?

Persistent high levels of unemployment unlike any economic recovery since the 1930s. Why?

If you knew that there was a large supply of apples at the stores that no one was buying, what would you suppose to be the reason? Your first thought might be the price. Maybe the price of apples is so high that no one wants to buy any. If they were free, someone would buy them. So, somewhere between free and the current price, there is a price that will get the apples off the store shelves.

The same is true with unemployment. At the right price, any business would hire. So, what's wrong with the price? Well, for one thing, imagine you hired someone and then told them a joke that they found offensive. They could then sue you for a few hundred thousand dollars. You could probably settle the suit out of court for $ 100,000 and that's that. So, what was the price of that employee again? Notice, I didn't even have to tell you the employee's pay rate. It is clear that the employee simply costs too much.

One could always say: well, don't tell offensive jokes. But, what if one of your employees told another of your employees an offensive joke. The same deal applies. (They might even conspire and tell each other offensive jokes and then they could both sue you!). You settle out of court for $ 100,000 and move on. But, you will think twice about hiring any more employees.

The cost of employees today is so laden down with litigation liability, various taxes (social security, workmen's comp, soon-to-be health care), family leave acts, etc., that if the employee agreed to work for free, the cost of that employee to a business is still very, very high.

So, businesses find another way. They outsource; they substitute capital for labor. Nothing will really change this. When the economy picks up, it will pick up slowly and haltingly because employment is never really going to go anywhere. Employees are simply too expensive.

Obama thinks that if only you could force them all to join a union, then things would be great. Just look at the recent decisions at the Labor Department and the NLRB for a whiff of the Obama medicine. Turning your work force over to a bunch of labor goons is not likely to boost employment -- witness the US steel industry, coal industry, any industry where unions have ever made any headway. In recent years, unions have made most of their progress among state and local employees and how is that going now? More jobs are being lost in state and local government than anywhere else in the economy.

If you want to boost employment, then lower the cost of employment to businesses by eliminating all of the litigation liability -- all of it -- and stop burdening employees with things that simply eliminate their free choice to decide how to finance their retirement and their health care. Let the employees decide for themselves. If someone is discriminating and it is illegal, then lets get on with a criminal prosecution. Let the person who makes the offensive remark pay the offended person, not the company where they both work.

"Human Resource" departments are really the front line of defense for larger firms to contain their potential litigation liability from the enormous burden of all politically correct legislation that has passed the Congress in the past two decades. Everything is now a "right" including, I guess, the right not to have a job.

If you want people to find jobs, then employer mandates must be reduced. Nothing short of eliminating virtually all of the politically correct legislation and court interpretations of the last two decades will do. Either you want people to have a chance to work for a living or you don't. Passing laws that shower politically correct mandates on workers means there will be fewer of them.