Not Hiring: The Untold Story of Small Business in America (September 16, 2011)
Small business isn't hiring, and the reasons are invisible to those without any real-world small business experience.
Most of the discussions about boosting hiring and employment are detached from the realities faced by actual small-business employers. Pundits protected by ivory-tower tenure or plump think-tank positions can indulge in the luxury of debating the efficacy of modest tax cuts on hiring, but for those in the trenches of small business, these economic-policy debates are as germaine and valuable as debating how many angels can dance on the head of a pin.
The reality is that adding an employee is very costly and adds multiple layers of risk. Small business is not going to hire another employee because the employer's share of Social Security taxes is a few hundred dollars less. Adding an employee could, without exaggeration, cost the employer his business and/or his sanity. Think of someone in the ocean with a water-logged life preserver, someone whose head is barely above water. That is the typical small business employer: it won't take much to push him/her under.
Robert F., a small-business employer for 22 years, shares the rarely-addressed point of view of the employer:
I own a security firm in a major Western-U.S. city. I have been an employer for 22 years. What a nightmare it is! Few seem to understand why businesses don't want to hire--here's my perspective.
Many non-employers will read this and dismiss it as hyperbole or atypical; those of us who have had burdensome payrolls know it is simply realistic. The issues of high costs and multiple risks are societal and cannot be reduced to econometric quantification; the burdens and entitlements built into the labor market are not fully revealed by statistics.
As someone who has experience as an employee, as an entrepreneur who ran a small business with dozen or more employees, and as someone who has spent decades as a self-employed free-lance contractor, I understand the compelling benefits of sole proprietorship in which all labor is subcontracted to other free-lancers/sole proprietors: the taxes, healthcare, insurance and all the rest are the responsibility of each free-lancer/contractor.
This arrangement places a premium on professional conduct: in this world, each sole proprietor agrees to do X work for Y compensation paid in Z timeframe. A focus on entitlement is of no interest to people expecting professional behavior and results. An "entitlement/employee" attitude will quickly alienate those who just need X work done in Y timeframe, and unprofessional work or conduct will result in a loss of future work.
The 1980s song proclaimed "take this job and shove it:" in this era, it's small business owners who are muttering, "take this business and shove it, I'm outta here."
While the dearth of small business hiring mystifies pundits and government officials, it's no mystery to me: I hear from small business owners all the time, and the vast majority are bailing out of their business and the travails of employees, taxes and legal hassles for retirement or a free-lance/contract mode of business.
In this world, security comes not from contractual obligations imposed on employers,
but on the quality and professionalism of the work and behavior. Those who mourn
the passing of the old era are free to start their own businesses and hire as many
people as they want.
If this recession strikes you as different from previous downturns, you might
be interested in my new book An Unconventional Guide to Investing in Troubled Times,
now available in Kindle ebook format. You can read the ebook on any
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The solution in one word: Localism.
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