Yesterday, I wrote about the $80 billion “jobs” ghost of a bill that did not seem to bring any jobs to the table. President Obama – after serious soul-searching – elected to focus his efforts on jobs, jobs and more jobs. The problem … current legislation for the new package provides few opportunities for job seekers.
My post yesterday is here, Malkin’s column on the phantom jobs bill is here, and Ed Morrissey brings us additional details tonight as written in the New York Times of all places, and it’s not even an opinion piece! (All right, it’s an AP story published in the Times…)
It’s a bipartisan jobs bill that would hand President Barack Obama a badly needed political victory and placate Republicans with tax cuts at the same time. But it has a problem: It won’t create many jobs.
Even the Obama administration acknowledges the legislation’s centerpiece — a tax cut for businesses that hire unemployed workers — would work only on the margins.
In short, if you were running a business and you were hoping for some sort of government plan to encourage you to hire new employees, you’d want a couple of things. Long term tax breaks, less aggressive regulation and some sort of legislative stability are three things that come to mind, and this legislation provides none of the above.
The current plan cuts the employers portion of Social Security taxes to zero until the end of the year, and in reality, businesses would only have about seven or eight months to take advantage of the program. There is also a $1,000 “bonus” if employers hold on to the employee for a full year.
Morrissey explains the problem, please do go read his full post.
Businesses hire people to meet demand, and they don’t hire people until that demand creates opportunity for profit beyond the price of the employee. Otherwise, the business loses money and eventually fails, or more likely, reduces its work force to meet the actual demand for its products or services in order to survive.
He goes on to explain the legislation does not provide a strong enough benefit to make it worth while for the employer to take the risk.
In order to take advantage of the tax break, the business would have to keep them employed all year long, regardless of their performance. …
For a full-time worker at minimum wage of $7.25 an hour would cost a business $15,080 in salary alone, plus roughly another 25% for overhead such as taxes, benefits, and ancillary costs, bringing the total bill for one employee to $18,850 for the year. What does the business get in return? A maximum of $6,621, and only if that worker earned over $100K for the year.
For you non-math majors – OK, I’m not one either – an employee that costs an employer about $50,000 a year in salary and benefits, the savings from the plan for the employer would be about $3,500 … (6.25% of a $40,000 salary plus the $1,000 at the end of a full year).
As a small business owner, would you be willing to take the risk of hiring an employee that would normally cost you $50,000 at the reduced salary and benefits total of $46,500?
Now consider the Obama administration still has its sights set on passing some sort of health care legislation and cap and trade is awaiting in the next room.
I don’t think it makes sense. What do you think? Let us know in the comments section below, it’s super easy to register and get involved.