Is It Too Expensive to Add New Workers?


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The Wall Street Journal serves an interesting pairing of articles this morning. The first explains that some firms are struggling to hire despite high unemployment. The second explains why some employers are choosing not to post jobs even though they'd benefit from the extra work. In short, we've got a skills-matching problem, and a surcharge problem.

The skills-matching problem is more complicated. After all, 25 million people are unemployed or underemployed. Why can't employers find one that they like? Author Mark Whitehouse is looking at the right menu of reasons -- structural unemployment, post-recession industry changes, people feeling tethered to their current address, poor technical education, even generous unemployment benefits -- but his excellent piece shows how difficult it is to provide an easy explanation for why some positions are going unfilled.

The more polemical, and problematic, piece explains why it costs $74,000 to put $44,000 in an employee's pocket and to give her $12,000 in benefits. Author Michael Fleischer writes that by taking on another worker, "I would be increasing my company's vulnerability to government decisions to raise taxes, to policies that make health insurance more expensive."

Here's where Fleischer is absolutely right: it is ludicrously expensive to add workers. Here's where he's not right: the acting government isn't really adding to that cost. Two-thirds of that $30,000 surcharge isn't the Obama administration: $12,000 comes from health insurance (for which we pay no taxes), $3,700 comes from Social Security taxes he would not have to pay under the new HIRE Act, and $6,250 comes from income tax withholding at a rate that is lower than at any time in the last 20 years and would not change under the president's proposed tax plan.

The key item here is the health care premium. It's been well documented that rising health care costs have eaten away raises and depressed median incomes. That's one reason why the Obama health care plan tries to push workers off employer-provided plans and pull them onto exchanges. Will the push-pull work? Depends on whom you ask. But I still don't see how the current administration's actions are making it prohibitively difficult to add workers.

That's my piece. In other news, Nascar and the recession are having an ugly collision. Enjoy Business Breakfast.

I Want to Hire, But I Can't: Even with high unemployment, some companies still can't fill their open positions. [WSJ]

I Could Hire, But I Won't: A communications president counts the many surcharges -- Social Security, health care costs, state and federal income taxes -- that give the fedds a third of the money employers spend on new hires. [WSJ]

Soak the Very, Very Rich: The U.S. is now a place where the rich and the ultra-rich really inhabit different worlds. So they should face very different tax burdens. [New Yorker]

First Thing, Let's Fire Some of the Economists: The White House's National Economic Council is pointless [Bruce Bartlett]

...And Then the Recession Came for Nascar: With its heavier reliance on working-class fans, low fuel prices and the beleaguered auto industry, Nascar has suffered disproportionately [NYT]

Flickr image courtesy of Laudu.
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Derek Thompson is a senior editor at The Atlantic, where he writes about economics, labor markets, and the entertainment business.

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