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Guest Post: Here's Why Small Business Isn't Hiring, And Won't Be Hiring

Tyler Durden's picture


Submitted by Charles Hugh Smith from Of Two Minds

Here's Why Small Business Isn't Hiring, and Won't be Hiring

The reasons why small businesses aren't hiring are structural; the dearth of jobs is not temporary, and this is not a "soft patch," it is quicksand.

The low job growth in the U.S. isn't a "soft patch," it's a sea of quicksand. In a nutshell, here's the situation: 2/3 or more of all job growth comes from small businesses starting up and expanding; only a third or less of new jobs come from Corporate America or government expansion.

As recent reports have shown, Corporate America has been on a hiring spree--overseas. From the point of view of globalized Corporate America, why hire anyone in a slow-growth market like the U.S.? It makes sense to hire new employees in fast-growing markets where the corporation is reaping its growth and most of its profits.

As for government hiring: the game of expansion based on explosively rising debt or Federal stimulus spending is over. To live within their means, local goverment and related agencies will have to shed jobs, as labor accounts for 80% of government expenses.

That leaves any future expansion of jobs up to small business. But small business isn't hiring, and won't be hiring, for these structural reasons:

1. The high costs of cartel healthcare, a.k.a. Sickcare in the U.S.
Corporate America and small business share one millstone: the absurdly high costs of healthcare in the U.S., which have been pushed onto the employers more as a historical accident than out of rational policy.

I have analyzed sickcare in depth, ( for example, Sickcare Will Bankrupt the Nation--And Soon) and it all boils down to this: we spend twice as much per capita on healthcare as our developed-economy competitors. Countries from France to Australia to Japan (three different systems) spend about 8% of their GDP on healthcare, and the U.S. spends 18% (17.6% in 2009, and of course sickcare costs leap up every year regardless of who's in office).

Here is a report worth studying: UNDERSTANDING U.S. HEALTH CARE SPENDING: 5 percent of the population is responsible for almost 50 percent of all healthcare spending. At the other end, half of the population accounts for just 3 percent of spending.

That 8% of "extra" money our nation squanders on paperwork, fraud, profiteering, needless procedures, useless drugs, $250,000 spent on the last few months of very ill patients' lives and all the rest of the insane sickcare system comes to $1.25 trillion. That is a "tax" on the economy which is paid mostly by employers, the self-employed and taxpayers via the monumental waste in Medicare and Medicaid.

I have covered this topic many times:

Why "Healthcare Reform" Is Not Reform, Part I (December 28, 2009)

The High Water Mark of a Broken System: U.S. "Healthcare" (March 20, 2010)

Skyrocketing Health Care Costs Hamper U.S. Competitiveness

Improving Americans' Health, With or Without Health Care Reform

Is Fee-for-Service What Ails America's Health Care System?

The vast majority of small businesses are marginal, and they cannot afford to hire employees when the already crushing costs of healthcare continue rising. The healthcare insurance for an employee with a family can easily exceed $1,000 per month, and more if the worker is over 50. Add in workers comp insurance, disability and unemployment insurance, and the employer's share of Social Security and Medicare (7.65%) and the "overhead" costs for hiring a new worker can equal or exceed the employee's salary.

2. Politicos and employees don't understand small business. How many politicos started a business from scratch and are still running a small business of 25 or fewer employees? Basically none. How many employees understand what it feels like to be skating close to the edge of emotional and financial collapse, month after month?

Employees wonder why their pay isn't rising, but the employer's compensation costs have been steadily climbing for decades thanks to sickcare and other systemic costs. As I have often said here: you'd have to be literally insane to hire anyone in this economy unless that employee will pull in so much new business that the costs are justified. Unfortunately, that is a rare circumstance.

Out-of-touch politicos think that trimming the employer's share of FICA (Social Security) 2% is going to make a measurable difference in a 100% labor overhead (i.e. you hire a worker at $2,000 per month and the overhead costs $2,000 per month)--what a joke. Great, my overhead per employee dropped to 98% from 100% while my sickcare insurance leaps by 10% a year.

3. Local government views small business as tax donkeys. Local government sees small business as one thing and one thing only: a captive source of extra revenue via higher licensing fees, junk fees, permits, surcharges, etc. Local government thinks small business is captive, but the local politicos and fiefdoms are forgetting every small business owner has an option: it's called closing down, and opting out of the rat-race of higher taxes and costs.

Many readers are small business owners who have bailed out, sold out or closed their enterprises: it was no longer worth the headaches, hassles and risks.

4. Litigation nation. Employees and others can take a turn at the lawsuit lottery wheel, and if they "win" then you lose. The stress alone is deadly. I know many employees think the owner is exploiting them, and that is a reality for undocumented workers and others. But the number of business owners who are trying to do right by their workers far exceeds the exploiters.

Meanwhile, the cost of "protection" against lawsuits keeps rising, too.

5. The "flexible, free-lance/ independent contractor" model of employment which has been lauded for the past decade as the key to America's rising productivity has some serious downsides--and I should know, as I've been a free-lancer for 20 years.

The basic "innovation" here is to offload that 100% overhead expense onto the employee via paying them more as an independent contractor or free-lancer. But that model has numerous structural weaknesses.

-- I.C.s (independent contractor) don't qualify for unemployment, so when they lose steady work there is no backup income. There is no 6 or 9 months' grace period where the free-lancer can work on Plan B--they're relying on savings the moment they cash their last paycheck.

-- We free-lancers pay our own taxes quarterly. Once your income drops then it's dangerously tempting to short-change that next quarterly payment or skip it entirely. Yes, you will owe less because you're making less money, but those with formal jobs don't realize we all pay 15% FICA (self-employed Social Security) on every dollar earned. Toss in state and Federal income taxes and even supposedly low rates (15% Federal, etc.) quickly add up to 35% or more. That means big tax payments, and big tax problems if you fall behind.

-- Free-lancers' income can drop sharply but that won't be reflected in any employment statistic; it will only show up in declining tax revenues.

-- Laying off I.C.s and free-lancers is the low-hanging fruit for enterprises cutting back. Based on what I've read and heard, most of these initial "easy" cuts to head count have already been made. So the next wave of lay-offs will be formal employees.

-- The number of I.C.s and free-lancers in the U.S. economy is simply enormous-- semi-official estimates put the number at 10 million but I would guesstimate the real number is more like double that: 20 million, or about 15% of the entire U.S. workforce of 139 million.

Many of these are facing zero income, others are scraping by with a few temp gigs and favors from old employers. None show up in official statistics. So when you read that 14 million people are officially unemployed, add in 14 million under-employed (barely scraping by) or totally unemployed I.C.s and free-lancers.

--- Many of the industries which supported I.C.s and free-lancers have been reduced to mere shadows of their former glories, and they won't be coming back. The print media industry supported tens of thousands of free-lance writers, editors, marketing types, ad agency temps, etc.--that industry is toast. The "creative" industries like music and film have also suffered huge cutbacks; as the Web has creatively destroyed income streams, then the number of jobs those industries can support shrinks dramatically.

-- "Consulting" is now a synonym for unemployment. Enterprises and government agencies which handed out consulting contracts like candy at Holloween in the good times have slashed consulting contracts to the bone. Many of these consultants had grown accustomed to pulling down $200,000 or more a year; with their incomes now essentially zero, that's a lot of business-class airline seats and fancy restaurant meals which will now go begging.

-- As regular employees get laid off, some will join the already overflowing ranks of I.C.s and free-lancers in the hope that they can transport their skills and contacts into a free-lance income. Some will, but most will be disappointed; principals are trying to maintain their own income and the only way to do so is not hire and not subcontract out any labor except what is absolutely necessary.

Conclusion: do't expect small business or independent contractors to create new jobs--they're trying just to hang on to whatever they have, not expand headcount.

I have addressed "the end of work" and structural unemployment many times, most recently:

The U.S. Economy Is About to Grow Explosively, Or Whatever
(February 7, 2011)

Unemployment: The Gathering Storm (September 26, 2009)


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Mon, 07/11/2011 - 23:36 | 1446619 Caviar Emptor
Caviar Emptor's picture

Here in NYC, like so many places, margins are razor thin and gone negative for some already. All cost inputs are on the rise. Business has topped out. Bottom line. 

Tue, 07/12/2011 - 01:13 | 1446810 SilverIsKing
SilverIsKing's picture


Tue, 07/12/2011 - 05:06 | 1446988 Mudduckk
Mudduckk's picture

Nope.  Offer more for less.  Give your customers your very best.  

For my biz, this meant firing all my employees, and delivering all services myself.  Tis the rare employee who gives a hoot about customers as much as the Pres.  Sure I do 10% of the volume I used to do, but I'm paying my wages, covering my overhead, and even putting up a little retained earnings.  That's better than what I did in some of the go-go years.

The proof is in the backlog, construction is my game, 6 months of bookings is as good as it gets.  I am booked four months out.  Could be better, could be worse, but I have not gone without billings for over two years.

The proof is in clientelle feedback.  They keep calling me for new work.

Sure I have strategy for growing market share beyond my capacity, adding headcount.  It has everything to do with can they sell? can they deliver? can they accept lower prices-paid? With genuine satisfaction for self? and for client?  Are they a five tool player?  If not...there's always job retraining.  Good luck with that...whatever that is. 

Tue, 07/12/2011 - 07:59 | 1447176 MileMarker17
MileMarker17's picture

I closed the doors to my construction business 6 months ago, after a 30 year career.  High end single family custom homes was 90% of my business, the remaining 10% was marine and commercial construction.

I decided to pull the plug because I could no longer stand the fact that my local building department had (de)evolved into an entity who's only function was to stick their hand in my pocket at every opportunity and who failed to realize that the $75 million or so that I pumped through the local economy over 30 years was not only beneficial to me, but to the county as a whole.

Up until a couple of years ago, if I thought the building department was treating meunfairly,or mis-applying building codes, or a whole host of other issues, I would fight for what I thought was right and generally prevail. As time went on, almost all dealings with the building department became a fight and I began to think "Man I can't fight everything, I'mgoing to have to decide which battles are most important."  In hindsight, this was the beginning of the end, they had beaten me down to the point where Inolonger could muster the will to stand up for what I beleived was right.  I acquired the mentality of "go along to get along"

One of the final straws that brought me to the point of shutting down, was the building department instituting a "re-inspection" fee for failed inspections.  In 30 years ofbuilding, up to that point, you could count the number of , inspections I failed on both hands. As the economy stalled and thebuilding business slowed, the revenue starved bureaucracy decided they were going to take what they could from me and my fellow contractors to make ends meet.  It became routine to fail 9 out of 10inspections, sometimes multiple times with a $50 tribute to the gubmint on each occasion for a re-inspection.

America has become a thirsd world nation where bribery and corruption is now the norm in being a small businessman and I for one am glad to have finally told them to kiss my ass and go bleed someone else unmercifully.

It's not much fun and it's a big adjustment not having that business cash flow that I enjoyed for so many years, but I've done what friends and I discussed for the past several years. I've taken my money out of the county that was my former home for so many years and purchased acreage in the mountains of Western North Carolina.  I've got abundant clean, fresh water, I've got a huge garden in, I've got animals and I'm working towards getting as far "off-grid" as possible.

Oh yeah......and I'm freaking armed to the teeth.



Tue, 07/12/2011 - 08:12 | 1447203 Silver Dreamer
Silver Dreamer's picture

You shrugged.  America, the country I love, was made great by people like you.  Unfortunately, as our federal government grows further and further out of control, more hard working, innovative, and liberty loving capitalists will do as you have done.  They will opt out.

Tue, 07/12/2011 - 08:41 | 1447262 Mudduckk
Mudduckk's picture

Interesting. Code office making bank on getting ticky tacky.  BS.

On one hand I'm sorry to see you exitied the business.  On the other of course I'm glad.

My gig is commercial.  Tile is my specialty.  Used to be 100% commercial.  Subbing to the Generals.  Now about 50/50.  GC the residential work.  Bath remods mostly.

I blog my biz at join in the commentary there.  Your input would be valued.

@mudduckk on twitter


Tue, 07/12/2011 - 11:38 | 1447860 HileTroy
HileTroy's picture

God bless you my brother builder. I miss buliding things I fought for 5 long years then got crushed. You got a excelent plan.

Tue, 07/12/2011 - 02:40 | 1446863 Michael
Michael's picture

Small business aren't hiring because there aren't enough people in line to buy their shit because there are too many unemployed people who don't have any money.

It's as simple as that. Really.

Virtually all the US consumer manufacturing jobs were off shored to China and other parts of the world. Why isn't anyone complaining about how that happened? NAFTA, CAFTA, and GATT that's how.

Tue, 07/12/2011 - 02:59 | 1446909 Tell me lies
Tell me lies's picture

It's called short term memory. Buba said it will be good for the USA. Ross Perot fortold it. To bad he went off the rails.

Tue, 07/12/2011 - 04:42 | 1446975 oogs66
oogs66's picture

completely true....all the rest is just cr*p excuses.  If people were lined up to buy stuff, people would be hiring, plain and simple.  No demand, no hiring.  Even with jobs, we won't see the demand we once had because China is still too poor for every household to have 3 flat screen tv's, and people here have lived so far beyond their means they don't need another flat screen tv, they need some savings and a downgrade of what they consume

Tue, 07/12/2011 - 04:43 | 1446976 Urban Redneck
Urban Redneck's picture

NAFTA, CAFTA, and GATT made movements easier.

However, increased regulation - litigation/complaince costs and compensation costs would have killed US jobs regardless.  A lot of Americans seem to complain that pay has been "flat" or that they have declined in real terms soley due to management greed, and they then fail to recognize or admit that their "flat" pay represents huge cost "inflation" to their employer (regardless of whether management is paying itself bigger bonuses).       

Without NAFTA, CAFTA, and GATT- instead of buying Apple iPads, US consumers would be buying Manzana, S?ba, or Píngguô iPads. 

Tue, 07/12/2011 - 05:46 | 1446986 Michael
Michael's picture

I really don't know what that means, but The United States of America really needs to re-arrange the furniture or have a whole house makeover.

One or the other.

This makes my point;

This commentator bitch is smart. She knows what she's saying. See how she really got interested in what Dr Ron Paul was saying, after the second teleprompter question, and let him speak in a great intellectual back and forth discussion.

I didn't think the MSM was capable of this type of discussion.

"I would take the duel mandate from them [The Fed] and let them have a check clearing outfit or something like that"

quote by : Ron Paul


Ron Paul Says 1.3 Trillion Dollar Debt Owed To Federal Reserve Is Not Real!

Tue, 07/12/2011 - 12:02 | 1447943 dugorama
dugorama's picture

So your evaluation of what's wrong with the US economy is that we're OVER regulated?  Really?  The financial sector included?

Tue, 07/12/2011 - 12:20 | 1448005 Sgt.Sausage
Sgt.Sausage's picture

Regulation is useless if it has no teeth. We really don't need more legislation/code/law/<whatever>. Adding more to an already ineffective body if law is a useless waste of time/resources/money if it's ineffective and essentially nothing more than a "slap on the wrist" (and hell, they don't even get that these days).

Bring back the firing squads, hangman's noose, and guillotine, and apply them effectively to existing regulation and we'll have no problems whatsoever in terms of compliance.

Tue, 07/12/2011 - 13:18 | 1448197 Urban Redneck
Urban Redneck's picture

To over simplify it, even in the financial sector -yes (qualification a few posts below). 

Laws and regulations exist to prohibit activity or guide into certain paradigms/loopholes (which have significant costs).  The Glass-Stegall Act was 53 pages.  Repealing it:  Dodd-Frank was 1616 pages, GLB was 145 pages, CFMA was 262 pages.  Each page of laws is implemented by several pages of regulations by the designated department within the executive branch.  The regulations create barriers to entry for all but the largest organizations (for whom the loopholes are designed to benefit).  The legal or regulatory goals can be met while eliminating 75%-90% of the pages of laws and regulations and in the process the loopholes which exist to serve large and moneyed interests can be closed. 

Treaties are more complicated because because at least two different legal frameworks must be synthesized in a single document, but the same truth holds, NAFTA and CAFTA are over 500 pages each and CAFTA required an additional 38-page implementation law.  Free and Fair trade doesn't require that many pages.  Carve outs for BIG Ranchers, Poultry, Agribusiness, Transportation, Telecommunications, Manufacturing, Labor, and Polluters are the bulk of language (the same text that hurts labor and industry in the US protects labor and industry in Mexico, although in some cases its the language that states each country shall be free to regulate... and then you have to back to the voluminous regulation in the US).

The US Tax code coupled with US accounting regulations are the worst offender.  There are legitimate issues that need be addressed in terms of double-taxation and phantom income of pass-through entities, but INCOME is INCOME, and there are tens of thousands of pages code whose primary purpose is so make sure GE's income is not John Q. Public's income, but that the net taxes paid are the same. 

Tue, 07/12/2011 - 07:38 | 1447136 1100-TACTICAL-12
1100-TACTICAL-12's picture

I hear ya, the dickheads on the tv analyze this shit to death , & never hit the nail. NAFTA<CAFTA&GATT.

Tue, 07/12/2011 - 07:49 | 1447160 Urban Redneck
Urban Redneck's picture

To paraphrase Abraham Maslow-

When all you have is a hammer, every problem starts to look like a nail.

Tue, 07/12/2011 - 11:39 | 1447864 Sambo
Sambo's picture

Maslow is also right...but I suspect we haven't looked into the tool box and noticed there are many other tools in there.

Maslow is saying in other words, thought is one-dimensional and therefore limited.

Tue, 07/12/2011 - 12:24 | 1448017 Urban Redneck
Urban Redneck's picture

Which is why the one-dimensional political debate in Washington will fail to actually solve the problem, and best best postpone a collapse.  There is an entire hiearchy of economic needs and issues that must be addressed in order to get out of the rather deep hole that the US had dug itself into.  The window for simple solutions closed several trillion dollars and some years ago.

Tue, 07/12/2011 - 03:25 | 1446926 darkstar7646
darkstar7646's picture

So have a lot of other things. People had better get used to that (even if you survive this) the way of life you've known (unless you are of the citizen class of the upper 1-1 1/2%) is OVER.

Tue, 07/12/2011 - 06:31 | 1447044 Bobbyrib
Bobbyrib's picture

Agreed, no matter who controls the WH, or Congress this is our new economy.

Tue, 07/12/2011 - 03:25 | 1446927 oh_bama
oh_bama's picture

I don't understand why people are crying as if there is no jobs.

There is a ton of jobs on craigslist---go take a look

i am surprised that there is no takers since some jobs are always there.

Tue, 07/12/2011 - 07:22 | 1447110 Bob
Bob's picture

Follow up on those "jobs" and you'll have a better understanding.  A hundred applicants for each job, most of which are part time, few if any offering benefits, many temporary/independent contractor/minimum wage/commission based . . . and, in my experience, various scams for getting people to pay for "training," referral services, data harvesting (including identifying and locating off the grid debtors), etc.

Tue, 07/12/2011 - 08:03 | 1447180 snowball777
snowball777's picture

Dealing drugs is not a career.

Tue, 07/12/2011 - 09:13 | 1447354 Long-John-Silver
Long-John-Silver's picture

but prostitution is......

Mon, 07/11/2011 - 23:36 | 1446620 HungrySeagull
HungrySeagull's picture

There is one hardware store that had two good employees for a while.

Now both are gone and the Owner's son is working the place for room and board.

The Owner has talked openly of closing the entire place down.

As the months go by, he may just do it.

Mon, 07/11/2011 - 23:39 | 1446632 StormShadow
StormShadow's picture

Long Remington, short Treasuries.

Mon, 07/11/2011 - 23:49 | 1446666 Boston
Boston's picture

"short Treasuries"

Are you nuts?  Have you noticed what the price of Treasuries has done over the last six months, ever since Bill Gross announced he's dumping them?

Be very careful if you're shorting via futures.  The long trade isn't over yet.


Tue, 07/12/2011 - 00:28 | 1446722 JW n FL
JW n FL's picture

Oil ='s the only FED approved short! ALL! I SAID ALL!! others will be fed to the dogs, this includes Bill and synthetic shorts.

Tue, 07/12/2011 - 01:49 | 1446850 Oh regional Indian
Oh regional Indian's picture

Indeed JW. They've made so much obscene money on Oil these last 8-9 decades, they can afford to lose a bit on it. Meanwhile, every other 'complex', stocks, bonds, commodities can be flung around like dog by it's tail using oil. 

Got to say, clever boys, whosoever set this whole play up.

Sadly and I've said this again and again, many refuse to recognise that thsi current industrial paradigm is over. With the new financial paradigm you all pray for, work towards... in a fractal world, it will all change, it has to. 

The key is to find what is truly next. Postcarbon! 


Mon, 07/11/2011 - 23:42 | 1446638 carbonmutant
carbonmutant's picture

Many empty storefronts in downtown San Jose...

Malls full of lookers and few shoppers

Tue, 07/12/2011 - 03:26 | 1446928 darkstar7646
darkstar7646's picture

Casing out what they're going to rob when TSHTF?

Tue, 07/12/2011 - 09:17 | 1447372 Long-John-Silver
Long-John-Silver's picture

A looting plan will help in obtaining the maximum amount of stuff.

Mon, 07/11/2011 - 23:42 | 1446641 ml8ml8
ml8ml8's picture

Report out today from the Kauffmann Foundation in Kansas City.

Mon, 07/11/2011 - 23:41 | 1446643 Aristarchan
Aristarchan's picture

The main reason my small business is not hiring is that we do not need additional employees to fill the reduced orders we get now, and that is the case with everyone I deal with.

Your points are valid, but if a business needs employees to turn out profitable work, they will hire them. They may well hire ICs....but very few companies I deal with hire them for production line work or other areas of manufacturing, usually ICs come into play in the salary slots.


Tue, 07/12/2011 - 06:33 | 1447048 Bobbyrib
Bobbyrib's picture

Junked for not using Neo-Con talking points regarding our President?

Mon, 07/11/2011 - 23:43 | 1446647 I am Jobe
I am Jobe's picture

many in Folsom , CA outside Sac empty strip malls. Green shoots. Time to leave the USA and buy a farm in Panama or somewhere and live life.

Mon, 07/11/2011 - 23:44 | 1446654 StormShadow
StormShadow's picture

If we tax the millionaire small business owners that'll turn things around ;)  They'll hire like crazy then!  AYFKM!?  Pure insanity

Mon, 07/11/2011 - 23:46 | 1446658 I am Jobe
I am Jobe's picture

Vodoo Econ.

Mon, 07/11/2011 - 23:46 | 1446659 carbonmutant
carbonmutant's picture

I've got a plan. Why not tax the FED?

Tue, 07/12/2011 - 00:55 | 1446785 gorillaonyourback
gorillaonyourback's picture

yeah,,,  best tax idea i have heard yet

Tue, 07/12/2011 - 04:45 | 1446973 agrotera
agrotera's picture

The Fed taxes us--they have conveniently added a 0.25% "expense" to all excess reserves in addition to the 6% on 1% of all reserves in the entire Federal Reserve system...the Fed of course explains that all "profits" are reimbursed to the treasury--but with so many expenses baked into their system, between fat payrolls for every PhD economist in the country, to the "expense" that gets charged for reserves, how is there any chance in HELL that the US can EVER get out of debt without revoking the Federal Reserve Act, naming and taking back control of the juggernaut that is the privately owned Federal Reserve Corporation?

Mon, 07/11/2011 - 23:47 | 1446660 Caviar Emptor
Caviar Emptor's picture

Cisco laying off 14%. Not all big biz is doing well. 

Tue, 07/12/2011 - 00:31 | 1446751 Fukushima Sam
Fukushima Sam's picture

Cisco has become a bit unfocused and is full of fat.  Those cuts will mostly improve the business within a year or two.

Chambers had the plan to run the company through social networks, and you can see how that is working out.  Ultimately, he will either need to take more control or turn it over to someone who can.

Tue, 07/12/2011 - 02:35 | 1446885 NoClueSneaker
NoClueSneaker's picture

Vyatta ... 

Mon, 07/11/2011 - 23:52 | 1446676 Seasmoke
Seasmoke's picture

can there be a worse situation to put yourself into right now than to pay someone to own a about getting screwed from every angle possible

Mon, 07/11/2011 - 23:56 | 1446678 whaletail
whaletail's picture

Those of us that can expand and hire won't because we don't trust that our customers will pay.  Counter party risk. The system is broken.  That causes one to think in terms of months, not years or decades. That's no way to grow a business, but that's reality. The platitude "fortune favors the bold" will surely be tested during these times. 

Mon, 07/11/2011 - 23:55 | 1446684 BKbroiler
BKbroiler's picture

I own a small business.  I have 3 employees, all 1099s, no health coverage, all commission only.  Salaries and benefits are like, so Clinton years.  Time to get real.

Tue, 07/12/2011 - 00:55 | 1446782 Cursive
Cursive's picture


I have 3 employees, all 1099s,

Careful, the IRS may hit you for payroll taxes on "constructive employees."

Tue, 07/12/2011 - 05:23 | 1446999 Mudduckk
Mudduckk's picture

BS. 3 employees?  Please.  Rare is the four person firm, ex-fin ops, which makes bank for the IRS.  The IRS knows it.  They don't get the marginal without effort.  Effort which exceeds cost of recovery, rather the IRS prays four-man misses his filing deadline, b/c he's too busy scraping by to comply.  Better yet miss an entire year...or two.  Hell go for three.  Not making profits anyhow so Timmay can wait on his "funny papers" err returns.  That's where the easy money is for the tax collectors, penalties and interest for not following the rules.  As if filing funny papers had anything to do with actually getting something done.  And that's what's messed up with this country.  No emphasis nor value is placed on actually doing/making something.

Tue, 07/12/2011 - 07:32 | 1447124 Bob
Bob's picture

Back taxes over three years old are dischargeable in bankruptcy (for individuals, at least.)  I suspect many 1099's are skipping the quarterly payments and quickly getting over their heads hoping for an upswing that hasn't come. 

Tue, 07/12/2011 - 01:35 | 1446838 DCFusor
DCFusor's picture

Did the same from 1980 till my retirement, with a nice trading stake (I'm not that old yet) to live on.  Worked great for me and my contractors (software development business).  Skipped most all local taxes, we all got paid a lot more than any salary/wage slave (high 6 figs), and didn't have the "issues" mentioned in the article, because we weren't stupid.  We knew darn well that those super-good times were the exception and banked what we didn't have time to spend -- and we worked 60-80 hour weeks so we didn't have time to spend much.  So when we decided to stop, well, we all just retired -- oldest guy was 48 at the time (me).

This might contravene some of the statments made in the article - we were never measured as "employed" by the stats in the first place, and aren't unemployed now by those measures.

In fact, where I live almost everyone who works is doing it off the books and for cash -- some won't even take a check as they want to stay off the radar and don't have a bank account anyway.

If there's no other reason the official numbers are bull, this one counts.  And we know the official numbers are so cooked you can't stick a fork in them.  The thing is, some people extrapolate far too much from their specialized experience as a city dwelling contractor to the rest of us, and it's just not accurate to do that all the time.  This is a large and diverse country once you get out of the mega cities and burbs, and it's not the same everywhere.  I live in a county with under 20k humans and one stoplight, where most people are farmers or retired, or knockabouts who work for enough cash to get drunk again, though I ran an IT business out of here, mostly telecommute, since it's about an hour each way to the nearest large town with any salary jobs at all.

I've spent the last 20 years or so working on being as self sufficient as possible -- it's hard, but also fun and feels good.  PV solar power since 1980.  Own artesian springs, acres of garden, a shop, and tools.

Big junk pile of raw materials I can turn into real value when I please.  I didn't do this for "chicken little" the sky is falling reasons -- it wasn't falling then anyway.  I did it to have power over my own life and what I do with my time.  Turned out good for the current situation, though.

I use my trading income for those few things that still need cash - internet, auto insurance, and to fund my research in nuclear I don't have to be a charlatan who goes out begging for money for what is admittedly a long shot.  I still sometimes "hire" 1099'ers.  I don't show up in those numbers at all...

There are a lot like me out here...I think that's good news for the country when TSHTF.


Mon, 07/11/2011 - 23:59 | 1446690 sub Z
sub Z's picture

A dem just got elected in a republican district here because she was willing to fight Washington for more medicare and the population is old in these parts. I'm guessing they think the money is plucked from the government money tree. Someone's in for a shocker.

Dependency Ratios: Social Security and the "Celtic Tiger"

Tue, 07/12/2011 - 00:31 | 1446711 G-R-U-N-T
G-R-U-N-T's picture

I recently had one of the heads of the "public works department" to whom I contract some of my services to say to me: "Your in private commercial manufacturing what's going on out there, I'm a little isolated in my position and am not aware what goes on out there". I told him the truth. "It's dangerously fucked up out there and many small commercial businesses are struggling."

Many people haven't a clue what's happening because they are encapsulated in a world where they are afraid to peek out the front door and see or know their own community commercial business manufacturing reality and what really makes things tick!

Mon, 07/11/2011 - 23:59 | 1446692 PhattyBuoy
PhattyBuoy's picture

What small business owner, in their right mind, is ramping up for a lost decade, or two ... good luck with that strategy !

Tue, 07/12/2011 - 00:00 | 1446693 WallStreetClass...'s picture

What no one is mentioning is that structural dislocation of costs and resources, caused by increasingly monopolistic and top heavy industry sectors, make is harder for small businesses to make ends meet.

Tue, 07/12/2011 - 00:00 | 1446697 poor fella
poor fella's picture

Why hasn't anyone pointed out the fact that multi-national/global corporations are also competing DIRECTLY with companies in their home countries? EVERY company that outsources to Chindiazil is why there are no jobs in the U.S.
If Immelt starts building airplanes in China, are they not busting up labor here? Nobody gets ahead except for boardmembers and CEOs - there is NO 'system' except that of greed. 'GET MINE' has gone global - THAT'S why jobs WILL NOT return. Business managers make decisions, health care costs and 'uncertainty' might play A TINY ROLE, but as an excuse to the lack of hiring, wow, that's a reach...
Trade imbalances and a lack of an energy policy that doesn't ship duffle-bags filled with millions in tax-payer dollars to despots, is a much bigger reason.

Tue, 07/12/2011 - 00:04 | 1446703 Caviar Emptor
Caviar Emptor's picture

According to a May study by The Wall Street Journal and Hay Group, top direct compensation for CEOs jumped 11% between 2009 and 2010 to $9.3 million,

Tue, 07/12/2011 - 00:09 | 1446708 poor fella
poor fella's picture

And yes, I realize spending is out of control and the wireless marionettes should be tossed on the bonfire - but I don't care if taxes are ZERO nationwide, it won't do a damn thing. Just like free Fed liquidity will spur the economy, it's a fairy tale, and we have the last decade to prove it. Jobs have been disappearing for that long (twice-over). Time to purchase a set of clippers and take up the barberous arts. We're on the slow decline to the faster-decline to - ?

Tue, 07/12/2011 - 00:01 | 1446698 G-R-U-N-T
G-R-U-N-T's picture

"2. Politicos and employees don't understand small business. How many politicos started a business from scratch and are still running a small business of 25 or fewer employees? Basically none. How many employees understand what it feels like to be skating close to the edge of emotional and financial collapse, month after month?"

One of your more salient points.


Tue, 07/12/2011 - 00:10 | 1446702 DavidPierre
DavidPierre's picture

Crunch time!

Washington has 2-3 weeks to obtain another credit card to pay interest on past debt and keep the doors open. Raise taxes? Cut spending?
It's all the same because whatever "austerity measure" is chosen, the real economy will feel the bite ... it obviously already is based on very weak numbers that cannot be massaged to look any better than horrible.
It is all a joke anyway because Washington will deficit spend the equal amount or more in little over 1 year than the amount they propose cutting over 10 years.
Whatever is done now will be ugly. Cut taxes, raise taxes...cut spending, raise spending...borrow more, borrow less...reach a deal or Obama unconstitutionally forces the debt ceiling higher, there is now absolutely no combination that can work and "save the day".

It is all "about the money" or the fact that there is no "money" currently being used on the planet that is real.
We shall soon see during this "crunch time" evidence that this is the case.
The tell tale sign will be sovereign interest rates ...that to this point have been held sacred... exploding higher.
Who will be the "leader" ...Europe, Britain, Japan ...the US? ... in this debacle?
But clearly someone will be.
There is currently more risk to owning ANY sovereign debt paper globally than there is owning yards and yards of COW MANURE!
Sovereigns far and wide will either default outright or hyperinflate which in either case means falling ...disappearing... bond values.

Taking this one step further, EVERYTHING paper exists and has "value" based upon all this sovereign debt.
The honest picture is that if everything derives value from government bonds, the systemic danger of what the USSA is trying to pull here is enormous. They are betting that investors will remain asleep and the auctions will just continue as they always have. I don't think so. I don't think we can push the fairy tale past this fall. In fact, most ...not all ... financial panics have occurred during the Sept.-Nov. time frame, this one, THE BIG ONE, the biggest one of all will also be an Autumnal event.

This IS because we have entered a period of "visible bankruptcy".
Greece, Ireland, Spain, Portugal and Italy all having blowouts to the upside in their interest rates while the U.S. tries to pull the wool over the world's eyes one more time.
Any government that must pay 10-15-20%+ interest rates rates IS already "visibly bankrupt". Secondly, more importantly and really the core to the whole problem. THE issuer of the world's reserve currency is hitting the financial wall and doing it VERY publicly.
Wall Street and Washington are stretching logic further than even an 8 year old would believe. Not that they haven't already done this since 2007 (even longer) but now we are pulling our pants down for all to see and it ain't pretty. The U.S. is already visibly bankrupt, it is only a matter of time before investors get their heads out of the sand and notice this.

The point is this, no matter what they come up with as a "solution", it will, must defy all logic.
U.S. government paper has pschologically been THE SAFEST place to invest money, (not really but psychologically).
Everything they have told us over the last 3-4 years has turned out to be way off base and wrong. Investors gave these sovereign powers that be all kinds of benefit of the doubt yet nothing has worked. Shoving more illogical policy on the table will just not cut it now as investors patience and gullibilt is worn thin and and outright panic will result.
If you have your savings in anything "government guaranteed", cow manure would be a better choice. At least it has a logical use!

Tue, 07/12/2011 - 01:34 | 1446837 Tell me lies
Tell me lies's picture

I am a novice on economics, ZH has been very educational.  I have come to the same conclusion. Most countries are bankrupt. The bond vigilantes will get to the US soon enough. When all the low hanging fruit is taking out and the ink of “reserve currency” runs dry, What then? Can the interest on our debt be manageable @ even 7%?

I have a question. If the world is insolvent, who is holding all the chips? China?

Tue, 07/12/2011 - 11:57 | 1447915 MachoMan
MachoMan's picture

The mouth breathers always hold all the chips...  it's just that we only get together every once and a blue moon to show it.  Odds are against us...  as a result, smart money is on net creditors with the most influence on present governments and collectability decreases the further away (geographically as well as politically, but certainly geographically) the creditor is from its debtor.

Tue, 07/12/2011 - 00:04 | 1446704 reader2010
reader2010's picture

Cisco has already lost its innovative/competitive edge. period.

Tue, 07/12/2011 - 00:16 | 1446720 whatsinaname
whatsinaname's picture

Wrong. Cisco is hurting big time from declining govt spending.

Tue, 07/12/2011 - 00:08 | 1446707 sasebo
sasebo's picture

With all these small business owners, their employees & I.C.'s suffering, where are the fat asshole bankers getting all that bonus money? Using public employee pension funds & 401K's to gamble with? Who's the counterparties?

Tue, 07/12/2011 - 00:12 | 1446714 mayhem_korner
mayhem_korner's picture

Interest free money from the Fed and a buy-back window courtesy of Brian Sack.  It doesn't take a genius (or even a large trading desk) to churn cash when the margins are riskless and the volume is gushing.

Tue, 07/12/2011 - 00:13 | 1446717 G-R-U-N-T
G-R-U-N-T's picture

There getting it from the tax payers under various deceptive and fraudulent schemes. 2008 was a wake up call to that reality.

Tue, 07/12/2011 - 07:19 | 1447102 Bobbyrib
Bobbyrib's picture

Speculating in agricultural and oil futures. The middle class has to eat and drive places...

Tue, 07/12/2011 - 08:58 | 1447305 fallout11
fallout11's picture

<sarc on> Just gotta' remember to leave those two activities (food and energy) out of the official CPI though.<sarc off>

Tue, 07/12/2011 - 00:09 | 1446709 rosiescenario
rosiescenario's picture

I would be willing to bet that the Fortune 500 companies have not created one net job in 5 to 10 the U.S. But they have far more power in D.C. than all the small business operators who are getting buried under more and more government regulation and who also cannot borrow from the banks D.C. bailed out.

Tue, 07/12/2011 - 00:12 | 1446715 I am Jobe
I am Jobe's picture

Jeffrey Immelt for President next. I wonder why he is not giving any speeches.

Tue, 07/12/2011 - 08:05 | 1447184 snowball777
snowball777's picture

Because he'll be installed instead of elected.

Tue, 07/12/2011 - 00:18 | 1446727 New American Re...
New American Revolution's picture

I can't believe that people are still so stupid when it comes to figuring out why there are no jobs and none on the horizon.   This article cast NO LIGHT on the problem, or the solution.    I'll give it to  you again, to wit:

There is no stability in the currency due to inflation.   Everyone is playing the inflation game.   Ergo, there are no savings.   No savings equals no investment.   No investment equals no new companies.   And no new companies means no new jobs. And for the life of me I can't figure out why social commentator's like the author of the above article keep mushing the issue around and make the problem and solution more and more obscure.   I expect it from Corruption DC because those people are either too crooked or too stupid, but I guess I expect more from someone that Tyler allows onto ZeroHedge.

Your slipping Tyler.

History is quite clear that if you want jobs, you have to have savings, to investment, to new companies to new jobs.    Is that simple and clear enough?   If your an existing company, your job is to cut jobs, to become leaner, more competitive, do more with less.   A well run exisiting company doesn't create jobs.    Can you say that with me?  

A well run existing company doesn't create jobs.   There, that wasn't so hard now, was it?

So all the rest of everything is pure bullshit.    You want jobs, get stability.   You want to bitch and whine, talk about everything else and let these rascals on Wall Street and Corruption DC go on doing just what they're doing, screwing the world.

I'm going to bed.   I'm waking up to the New American Revolution (it will be televised).

Tue, 07/12/2011 - 00:29 | 1446745 G-R-U-N-T
G-R-U-N-T's picture

Go to bed if you will, however IMO you are already in a state of unconsciousness. :o

Tue, 07/12/2011 - 01:21 | 1446821 Peak Everything
Peak Everything's picture

You are as stupid as the people you criticize.

Savings requires surplus wealth. Wealth is proportional to the rate of energy consumed. Net energy is in decline because we've used up about half of our windfall. Therefore wealth is in decline. We kept the perception of growth going for a while with debt (future wealth pulled forward). Unfortunately our debt based monetary system requires growth to function. Paper wealth is now vaporizing and we are reverting to a lifestyle that can be supported by available energy flows. Since we overshot on the way up we can expect to undershoot on the way down. There will be a few bounces but you can expect your standard of living to decline for at least a century because 98+% of the energy we use is non-renewable.

Tue, 07/12/2011 - 01:42 | 1446844 KTV Escort
KTV Escort's picture

I junked your long-winded and arrogant idiocy. CHS laid it out brilliantly. My father ran a small company for 20 years. Began with 3 employees, Danaher bought it out recently with 67. A well-run company should grow, diversify, and create more jobs, with increasing wages. I've been working at a small company for the past 8 years... we did begin to expand, but sometimes a great product/service plus an aggresive sales force still can't overcome points 1-5 above. In 2008 we had 55 employees, now at 27.

Tue, 07/12/2011 - 01:41 | 1446845 i-dog
i-dog's picture

"Your [sic] slipping Tyler"

You're an idiot ... and an uneducated one at that!

You can't build savings for later investment if those savings are being taxed to dust and further eroded by regulatory confiscation (eg. mandatory employee "benefits", reporting overheads). That was just one of the points that you missed in the article.

"A well run existing company doesn't create jobs."

Small businesses create jobs during the startup, growth and expansion phases of the business cycle. Only LARGE businesses in the maturity phase will begin to optimise and retrench until they eventually fall into decline.

The only small business that fits your simplistic view is one that expands through merger and acquisition rather than through organic growth. That is not typical.

"I'm going to bed"

Mommy will be angry if you haven't finished your homework! Come back to ZH when you've finished school and we'll see if you've progressed at all.

Tue, 07/12/2011 - 03:02 | 1446911 Dburn
Dburn's picture

Mommy will be angry if you haven't finished your homework! Come back to ZH when you've finished school and we'll see if you've progressed at all.

Now Now, we don't know if he still calls his mother mommy. Probably more like mother or by her first name and yes he's living at home and spouting of that nonsense because the only well-run well performing companies that don't hire are usually owned by greedy hedge fund managers who sometime qualify as a small business if one uses the Labor dept definition of a small biz as "less Than" 500 employees without regard to revenue. So a Paulson like Hedge fund who makes more profit in the aggregate than most small businesses who produce something of value, is considered a "Well Run" small business.

That's another person who not only needs to be kicked out of his or her elitist bubble, but needs to do a start-up of their own without of any of "fathers" money or his connections.

"A well run existing company doesn't create jobs."

JHC, were do we get these idiots?

Tue, 07/12/2011 - 00:22 | 1446734 gwar5
gwar5's picture

I'm not hiring because the US is under siege from a Latin style marxist takeover attempt. Obama thinks he is my business partner and entitled to half the profits. I prefer somebody more qualified who can actually bring something to the table.

I'm performing my civic duty and going on strike, ala John Galt. I would sell the business and move out of country if I could find a buyer and they could get a loan from a bank.

Tue, 07/12/2011 - 00:24 | 1446737 Caviar Emptor
Caviar Emptor's picture

Even the Hedgies are havin' a lousy run:


Net hedge fund outflows, as measured by GlobeOp's (GO.L) Capital Movement index, were 0.2 percent of GlobeOp's assets under administration in the month to July 1 -- the highest monthly net outflow since October 2009.

The withdrawals, which buck the trend for investors to return to hedge funds in the aftermath of the credit crisis, may reflect nervousness about recent poor performance from portfolios that many expect to make or preserve money in all market conditions.

The average hedge fund lost 1.22 percent in performance terms last month, according to Hedge Fund Research, after losing 1.14 percent in May, as managers struggled to deal with market uncertainty


Tue, 07/12/2011 - 00:29 | 1446738 poor fella
poor fella's picture

Nationalize a bank or three and re-address single-payer healthcare. If people didn't have to worry about healthcare, how large a burden would that be off of everyone's shoulders to move forward like a spirited animal of capitalism? Over 70% of bankruptcies due to health related issues, HAVE HEALTH INSURANCE. We should be allowed to buy Canadian or Cuban health cards (cripes Mexican health cards for Tijuana General in a pinch would be better than owing $80k to Blue Cross for minor surgery).

Tue, 07/12/2011 - 01:30 | 1446833 Buckaroo Banzai
Buckaroo Banzai's picture

Dude, you are high on crack. Single payer is a fucking disaster. Pull your head out of your ass, Canada's health care costs are low for a very good reason: they deliver mind-bogglingly shitty health care.

Health care is not an insurable risk. Let me repeat that for the hard of hearing: HEALTH CARE IS NOT AN INSURABLE RISK.

Eliminate health care insurance and watch the cost of health care drop like a rock. That's economics 101.

Tue, 07/12/2011 - 02:26 | 1446875 Gadocat99
Gadocat99's picture

You are spot on.  I have seriously thought I was the only person in the western hemisphere that believes that the real issue is health insurance.  I have worked as a National Accounts Manager for pharmaceutical companies.  We sold a reasonably priced asthma medication that competed against a much more expensive (and less effective) competitor.  The national pharmacy benefit managers would select us or our competitor for their member formularies.  Much more often than not it was our competitor that was selected (at 2.5x our cost).  I learned that the PBMs would do this to maximize their rebate from the pharma manufacturers.  So in essence, they selected the most expensive medications to be placed on their formularies because they received a higher total rebate.  My company was at a disadvantage because we kept costs low with our drug.  The system of insurance completely skews the financial landscape and is the principal reason for all price increases seen in the U.S.  We don't need a single payor system -- we need a cash based system.  All services would balance down to the level that the consumer could pay.  I think it's called capitalism, and it is in very short supply.

Tue, 07/12/2011 - 03:02 | 1446914 Rynak
Rynak's picture

Maybe not a "traditional" insurance..... but my intuition tells me, that it - if that to which insurance applies is well choosen - can be insured.... but it would need to happen in a way, where the "consumers" still have an interest in keeping costs down - some kind of "reward".

Tue, 07/12/2011 - 04:52 | 1446980 zuuuueri
zuuuueri's picture

there's nothing like paying your own way, to inspire you to keep your costs down... and there's no reward like saving your own money. all these schemes to average it out with a handful of people paying for all these deadbeats... while the fatcats take a comfortable percentage.. are a miserable failure, and always will be.

Tue, 07/12/2011 - 05:19 | 1446996 Tell me lies
Tell me lies's picture

Why has no one mentioned tort reform. How much does friv. litag. account as a % of the cost struct ?

Tue, 07/12/2011 - 02:28 | 1446877 Gadocat99
Gadocat99's picture


Tue, 07/12/2011 - 02:56 | 1446905 John_Coltrane
John_Coltrane's picture

"HEALTH CARE IS NOT AN INSURABLE RISK."  Bingo.  The entire health care over-inflation cost trend started with the advent of large scale insured health policies-which also was about when house calls ended forever.  This causes overuse as its "someone elses money" and absolutely no fair market for price.  The same would be true for refrigerator (or name your favorite thing) prices if we had subsidized prices.  Without these subsidies doctor would certainly earn no more than engineers.

When things are "free" they end up costing more!

Tue, 07/12/2011 - 08:19 | 1447219 Flakmeister
Flakmeister's picture

Clearly you like to make shit up on the fly re: quality of health care in Canada... You have no idea what you are talking about...By every measure of national health care, Canada is ahead....

One reason it is cheaper is the Government negotiates with Big Pharma instead of subsidizing them....The treatment of torts is also different (small effect). There are more health care administrators making $250,000 pa in Westchester Co. NY then in the entire country of Canada....The list goes on...

Tue, 07/12/2011 - 12:14 | 1447989 dugorama
dugorama's picture

Single payer is a disaster?  So, you're satisfied with WHO ranking our health care system as teh world's 34th? (behind Slovenia) or the CDC ranking our infant mortality rates in the high 20s (behind Cuba)?  Funny how every single country ahead of us has single payer......

Tue, 07/12/2011 - 12:14 | 1447990 dugorama
dugorama's picture

Single payer is a disaster?  So, you're satisfied with WHO ranking our health care system as teh world's 34th? (behind Slovenia) or the CDC ranking our infant mortality rates in the high 20s (behind Cuba)?  Funny how every single country ahead of us has single payer......

Tue, 07/12/2011 - 10:41 | 1447628 poor fella
poor fella's picture

I agree with getting rid of health insurance entirely. I'm really saying that the political bitches need to take BIG steps instead of kowtowing to every corporate interest. Mix it up a little and just PRETEND to care about the people.

Never been to a hospital in Canada, but I did pop by a doctor's office in Costa Rica. There were chickens out front and a dirt floor. Signed my name with date and resident country - and received a prescription for a shot that cost me 3 bucks... In and out and to the beach in under 20 minutes and could still afford to fill up the cooler with beer. That service would be considered 'shitty' by some, but for me at that time, it was perfect.

Fck big pharma, try and stay healthy in the first place. Also agree my head is lodged firmly in my ass for thinking, even for a microsecond, that politicians would go against their corporate mandates.

Tue, 07/12/2011 - 00:34 | 1446754 DoChenRollingBearing
DoChenRollingBearing's picture

I owned (or in one case partly owned) three small businesses in the US (last one was 12 years ago).  Each failed, but mostly mine (or our) own fault.  But, some of the above repliers had some of the headaches I had.

The only business that has worked is our bearing company in Peru, which I am now visiting.  And putting on some weight with all the yummy food down here...


Some of you in the past couple of days have asked to be connected to my blog.  Today, our consulting computer came by and by late afternoon installed antivirus software, so with luck I will add you to my blog list tomorrow.  And I hope to write about my interesting trip so far, about to be MORE interesting tomorrow when Mr. Maekawa visits...


There is no way in Hell I would start any US business now (at least with my limited skill set), and the ABUSIVE government regulations and taxes.  No F´g way!!!

Tue, 07/12/2011 - 00:34 | 1446756 spank-of-america
spank-of-america's picture

Even if every small business could opt out or chose not to offer any form of healthcare there would be no more new hires or raises for current employees. The owners would just keep all the extra profit or buy a nicer building/equipment and write off the "depreciation."

I remember our "small business" owner telling our raises went away because the state raised taxes. If they repealed all taxes would we get a raise? Fat chance. I've never met a small business owner who actually admits to making a profit to his employees. They're money hungry bastards just like the CEOs of major corporations.


Tue, 07/12/2011 - 00:43 | 1446771 youALREADYknow
youALREADYknow's picture

The difference is that the typical small business owner hiring an employee or giving a raise is a direct liability out of their own pocket. They are the ones whose credit and finances are typically on the line in case of bankruptcy. Major corporations and venture capital backed companies are playing with the house's money.

Small businesses won't hire until they believe they can support that employee for the future.

Tue, 07/12/2011 - 01:45 | 1446848 DCFusor
DCFusor's picture

Obviously spank never met or worked for me, as I did give some real good raises -- whatever our customers would support.  But then I only hired those with a good attitude, team outlook, who looked at how they could create value for us all, not simply whine about how little they could suck out of the outfit for doing little or nothing in a sinecure.  We just didn't hire that type, ever.  And a heck of a lot of what applies now is just that type -- entitlement mentality people who think some past experience or paper quals make them automatically worth a ton of bucks -- even if they actually produce nothing other than complaints.

Looks to me like businesses cut the right people, mostly, based on what shows up when I put out job offerings.  Losers.

Tue, 07/12/2011 - 02:09 | 1446865 Mike2756
Mike2756's picture

"Looks to me like businesses cut the right people, mostly, based on what shows up when I put out job offerings." Ha! Wish they would do that where i work!

Tue, 07/12/2011 - 08:22 | 1447167 Bob
Bob's picture

Every employee wishes to encounter that unicorn of the "good employer."  No doubt there are righteous employers out there--there are exceptions to every rule--but any discussion is going to be severely undermined, imo, by the fact that there are no small business owners who see themselves as exploitive pricks, regardless of the reality of the matter.

And you have to sympathise with that somewhat--it's not as though their employees are telling them how it really is.  And who else could do it?

Of course, any employer is simply going to respond that the employee has a "bad attitude," no clue about what it takes to grow a business, etc. 

I see no real possibility of a productive discussion on this. 

Tue, 07/12/2011 - 08:48 | 1447279 Invisible Hand
Invisible Hand's picture

Small businees owners are human beings too.  They have all the good and bad qualities we all have.  Unfortunately, most of us do not recognize our own faults either.

However, most humans are basically decent, within limits.

My experience is that individuals are more decent than large organizations.  I would much rather rely on the charity and goodness of the average small business owner than the government.

Tue, 07/12/2011 - 02:57 | 1446906 spank-of-america
spank-of-america's picture

I'm glad you gave some good raises but I haven't experienced a generous owner myself.

I proved my value in quantifiable ways, actually adding to the bottom line. The owner told me time and time again what a great job I did and dangled that carrot telling me I would get a raise, never happened.

I took a job closer to home and two weeks later he has my co-worker call me and offer more money...Why not just give me a raise in the first place? It's because he didn't "have to"...

Which is my point, as long as employees settle for "being happy to have a job" they'll end up doing more work for less, no matter what changes with healthcare or taxes and the owners will take this all the way to the bank. Constantly telling employees how tough it is for them whether it actually is the case.

Again, just my experience, sorry to sound so bitter...

Tue, 07/12/2011 - 02:02 | 1446862 AnAnonymous
AnAnonymous's picture

I've never met a small business owner who actually admits to making a profit to his employees. They're money hungry bastards just like the CEOs of major corporations.


It is good that someone recalls that small business owners in the US are US citizens first. Dont paint them with qualities they do not have.

Tue, 07/12/2011 - 00:36 | 1446758 sub Z
sub Z's picture

Also, all that scary stuff being said, does not give the go ahead to wuss out. If everyone sticks their gold under the mattress we will be sunk for sure. It depends on the situation but I'm seeing a lot of people on the internet who are taking themselves out of the game ass first.

Tue, 07/12/2011 - 00:39 | 1446767 youALREADYknow
youALREADYknow's picture

The next decade is going to be ugly in the U.S.A.

Corporations made a killing post-GFC because they replaced FTE's with outsourced departments and contractors (typically not IC's, but H-1B's from firms). Well, the gig is up on the huge margins in outsourcing now that every foreign entrepreneur has set up shop doing the exact same thing. I've seen the margin collapse get worse and worse in IT consulting the past few months and there's no end in sight.

So the next step in the payroll picture won't even be visible to most "economists". The H-1B's are crowding themselves out of work due to oversupply domestically and once they can't find a job here then why should we expect Americans with even higher salary expectations to find any work?

When you see foreigners actually returning to their home countries for work (the countries experiencing wage INFLATION, unlike the wage DEFLATION occurring here) then you know it's too late. 

Tue, 07/12/2011 - 01:06 | 1446799 gorillaonyourback
gorillaonyourback's picture

"When you see foreigners actually returning to their home countries for work (the countries experiencing wage INFLATION, unlike the wage DEFLATION occurring here) then you know it's too late."

well its to late, many of the mexicans have gone back here in southern california,  that fence they are building is to keep us tax payers in,,,,, fuck:(

Tue, 07/12/2011 - 00:58 | 1446788 chindit13
chindit13's picture

We are extending and pretending on debt right now, which really was just a way to extend and pretend on the illusion that everybody who wants gainful employment actually has something waiting.  Our eternal race for greater productivity has always run faster than our ability to come up with new ideas, just as our technological evolution has always exceeded our emotional evolution.  The debt explosion bought time and temporarily allowed us to occupy that space between a rock and a hard place.  Sure a lot of folks got sinfully rich off the debt boom, but its real purpose was make-work and to forestall the inevitable. 

Had China and India just played along and been willing to remain in abject poverty and preferably out of sight for another generation or two, the already developed world might have been able to get through all this relatively unscathed.  It didn’t work out that way, and the easily replaceable in the developed world have been the early casualties.  As for China and India, they will suffer because the developed world didn’t stay rich long enough to buy off the yokes of poverty that keep those lands from being driven by domestic consumption.  Outside of the grand shopping malls, the average Chinese has little left after spending half his pay on food, and the average Indian has seen flat wages but a 20% rise in the cost of staying fed.

Coincident with this last gasp at manufacturing human relevance in the West was the creation of Social Networking (aka Cyber Day Care), a phenomenon with two purposes:  to employ those who still have raging hormones but who are not running around in Iraq or Afghanistan burning them off, and to provide a harmless though banal outlet for us narcissists who actually think anybody gives a shit when they take a shit.

Maybe it’s Cynical Tuesday out here, but there does not seem to be a cure for what ails us.

Anything remotely comparable in history has brought about war (fighting is more exciting than unemployment or menial work…see Lebanon of the 1970’s as a good example), or a wholesale return to superstition manifested in things such as religion, astrology or other forms of mumbo-jumbo and pacifying delusion.

With luck we’ll survive this dark period by sitting around the communal fire singing traditional songs and passing down myths that both create meaning and instill a fear of misbehavin’, only occasionally raiding a nearby village for grains or women.  I suspect we won’t be so benign.  When disappointment has access to technology, mayhem ensues.

Even on the blogs, whose prime function is to provide a venue for blowing off steam, anger and threats of violence are on the rise---and all that comes from people who are essentially impotent and powerless.  Individuals come first, then races, ethnic groups and countries, the latter of which have the means to add devastation to their anger.

Get Darwinian fit or get lucky, ‘cause an ill wind this way doth blow.

Mako, we hardly knew ye.

Tue, 07/12/2011 - 01:11 | 1446805 gorillaonyourback
gorillaonyourback's picture

i say pick the best 150 people around you and prepare for battle

Tue, 07/12/2011 - 01:40 | 1446843 Peak Everything
Peak Everything's picture

Very well said.

I agree with everything except your understanding of the role of technology. Technology is mostly innovative ways of consuming energy. Most of our energy is non-renewable and physics will keep it that way.

Tue, 07/12/2011 - 01:52 | 1446854 Bolweevil
Bolweevil's picture

Nice work Chindit.

Tue, 07/12/2011 - 08:15 | 1447210 snowball777
snowball777's picture

Social Media Explained:

Twitter: I have to pee.


Facebook: I peed.


Youtube: Look at me pee.


Yelp: Where's the best place to take a pee?


Craigslist: Who wants to buy some pee?


Foursquare: Here's where I pee.


Linked In: I'm good at peeing.


Quora: Why am I peeing?


Google+: Let's all pee together.


Fuckbook: Who wants me to pee on them?


Tue, 07/12/2011 - 01:31 | 1446835 What_Me_Worry
What_Me_Worry's picture

UST should just sign up for an AMEX card.  No pre-set spending limit!!!  Problems solved.  AMEX going to be pissed, though, when they pay their first bill in IOUs.

Tue, 07/12/2011 - 01:38 | 1446839 TruthWave
TruthWave's picture

I work as a professional fundraiser for a non-profit that has been serving the blind since 1899.  Helen Keller was one of our clients receiving our Braille magazine in the later years of her life. Some how our non-profit has survived through the great Depression and WWI and WWII.  But, the current economic situation that we find ourselves in is the "Mother" of economic crisises. But, at its core the root causes of this economic crisis are moral in nature.  Moral corruption, in government, and the private sector and caused our economic ruin.  History repeats itself, but this will be the last repeat.

Tue, 07/12/2011 - 01:54 | 1446857 williambanzai7
williambanzai7's picture

All one needs to do is look at what it takes to get a sidewalk vender license in NYC.

Tue, 07/12/2011 - 02:13 | 1446870 sethstorm
sethstorm's picture

2. Politicos and employees don't understand small business. How many politicos started a business from scratch and are still running a small business of 25 or fewer employees? Basically none. How many employees understand what it feels like to be skating close to the edge of emotional and financial collapse, month after month?

That is a heaping pile of willful/mistaken ignorance(with a bit of arrogance) on the side of business, even small business.  These people are aware of what's going on.  These people, thanks to the less stable forms of work offered by business, are in that same situation! 

As for those who wish to destroy and sabotage, a government will come that does not look kindly on what is being done to withhold work.  The call will be to have business work with the cards they're dealt, not the cards they want.  

The good point from this article is that it recognizes that the indirect work(read: contracted) is a sign of an extended problem. 



Tue, 07/12/2011 - 09:06 | 1447295 G-R-U-N-T
G-R-U-N-T's picture

What are you on Quack?

Give me a break, most employees haven't a clue what goes on behind the scenes unless he or she has been informed by the owner or if they have owned their own business and can relate because they have been there.

However, I have learned if the employer is straight and informs their employees most will sympathize and do what they can to help. Most employees have their own world they live in absent of the realities of what their business owners are actually going through.


Tue, 07/12/2011 - 02:29 | 1446879 AldousHuxley
AldousHuxley's picture

small business is dependent on major employers in the region. You will see restaurants close down in Detroit when GM can't sell cars. Most small businesses are in retail. The asset inflation has take such a large chunk of everyone's paycheck that after paying taxes and rent/mortgage, healthcare to medical complex, and student loans to education complex, nobody has any discresionary spending money left over.

The key is to let home prices sink and let the banksters take the hit as well as debt holders. Then pass laws to lower healthcare and education costs not subsidize them.



Tue, 07/12/2011 - 02:30 | 1446881 sundown333
sundown333's picture

Some things that bother me. I keep hearing about social security/medicare are about to get cut. I hear people calling it "entitlement". Really? Seems that they took money out of my paychecks for that which was meant to come back to me in my old age but I am supposed to believe that when it is my time to collect, I am asking for a gift? Don't think so. The government screwed social security/medicare up so "THEY" need to fix it and fork it over, NOT CUT MY PRE-PAID BENEFITS!

Tue, 07/12/2011 - 08:39 | 1447255 Invisible Hand
Invisible Hand's picture

Sounds fair but...

The reality is there is no money.  Is that unfair?  Yes but life isn't fair.  If life was fair you would have an average income ($7K worldwide vs. $50K US), average lifespan (67 worldwide vs 85 US), have little or no freedom and little hope for a better life.

The US had a good run.  We are still better off than most of the world (and will continue to live better---if we buckle down and accept that the easy times are over and get to work).

Demands that "someone" give us what we were promised aren't going to happen.  We were promised more than can be delivered.  That reality is starting to sink in in Europe.  The socialists have run out of other peoples money.

Sorry, it is time for all of us to grow up.

Tue, 07/12/2011 - 11:02 | 1447723 takinthehighway
takinthehighway's picture

Well said.

Tue, 07/12/2011 - 02:51 | 1446901 Rynak
Rynak's picture

Employees wonder why their pay isn't rising, but the employer's compensation costs have been steadily climbing for decades thanks to sickcare and other systemic costs.

I'd like to add that on top of high costs via an inefficient healthcare system, there is a self-reinforcing feedbackloop: Because of the low wages and high unemployment, buying power is low for the target audience of small business... so, for small business, both variables of the equation are bad: Costs AND revenue.

Tue, 07/12/2011 - 03:20 | 1446924 bigwavedave
bigwavedave's picture

I pay my employees $5 a day. suck on that ya fat yank bitchez.

Tue, 07/12/2011 - 08:16 | 1447214 snowball777
snowball777's picture

Little boys in Thailand aren't "employees".

Tue, 07/12/2011 - 04:04 | 1446961 dolly madison
dolly madison's picture

I completely agree with your article.  Great article.

Tue, 07/12/2011 - 04:08 | 1446963 Jack Napier
Jack Napier's picture

I have a buddy who works in healthcare, and just told me they are going to lay off 3-4% of their workforce due to state and federal funding cuts as well as patients not being able to pay and increases in charity care. I think everybody knows that stimulus has reached the end of its usefulness, and things are about to get ugly whether or not QE3 happens.

Tue, 07/12/2011 - 04:16 | 1446965 Slipmeanother
Slipmeanother's picture

There is no problem, we have a service economy and we all do each other laundry now STFU

Tue, 07/12/2011 - 04:44 | 1446977 plocequ1
plocequ1's picture

My wife got a job at Chase here in NY. She loves it, Makes good money. Go figure

Tue, 07/12/2011 - 04:47 | 1446979 props2009
props2009's picture

Italy leading the contagion. When will China come in?

Tue, 07/12/2011 - 06:25 | 1447040 IslandMan
IslandMan's picture


Thank you !  Your post is a great riff on most of what ails America and in fact all the West.  Add in woeful education standards and military overstretch (esp US),'s a wrap ! 

Tue, 07/12/2011 - 06:49 | 1447064 Ricky Bobby
Ricky Bobby's picture


Lifelong small business fool here, Charles nails it. Slowly bleeding negative, something has got to change. Last night sleepless for me, struggling with what to do next.  No practical solutions present themselves. Fate and I square off and I fear only the symbolic path remains.

Tue, 07/12/2011 - 07:09 | 1447086 Sandy15
Sandy15's picture

I had five businesses with over 25 employees.  Now I have three businesses with about 5 employees.  Current employees are getting less hours or less salary to cut cost due to lower revenues.  Obummer administration is making the situation worse.  Have cut my own pay to prevent laying off current employees, but running out of savings to live on.  Will have to lay employees off soon if something doesn't change.  I expect things to get worse, not better.

Tue, 07/12/2011 - 07:32 | 1447089 Dirtt
Dirtt's picture

Emigration Man

Tue, 07/12/2011 - 07:17 | 1447101 writingsonthewall
writingsonthewall's picture

What you are witnessing here is the ultimate end game of capitalism where it buffs up against the social needs of the people.

US jobs have gone abroad because there are people out there in the emerging markets who will work for less than a dollar a day. Unless American workers are prepared to match them - then the capitalist run corporations will choose the cheaper option (they call that market efficiency). Sorry it's your job America - but this is the system which you backed as being "the best of all the others tried".

It's no good boo hoo'ing about the lack of jobs now - this is a direct result of apathy amongst those people who "play capitalism but don't understand it's consequences".


Those of you with intelligence will see the end result will be 'slavery or death' - in a wonderful about face of human rights where you WILL accept whatever the master is offering as a wage - because otherwise you and your family will starve.


Don't believe it? - well I'm sure you don't. However reality has a habit of catching up with you eventually - no matter how far removed from it you are.

Tue, 07/12/2011 - 08:25 | 1447223 notadouche
notadouche's picture

How has the alternative to capitalism worked how for the USSR, most of Europe, Latin America and the list goes on?  Alas don't believe for one minute that America is a true capitalist country.  Those days are long gone and what you are seeing is the effects of socialism ideals eating away at America like termites in an old rotting house about to collapse.  America pretends to be capitalist in gift wrapping only, when you open the package you see socialism rotting the system to the core.

Tue, 07/12/2011 - 13:09 | 1448166 sethstorm
sethstorm's picture

What happens if the US is willing to start turning against the businesses who go offshore?  That seems to be the next logical step.

The US has the firepower and the ability to demonstrate that there is no safe haven for slavery-by-business. 




Tue, 07/12/2011 - 13:28 | 1448235 Urban Redneck
Urban Redneck's picture

Actually it doesn't have the firepower, short of a suicidal M.A.D. W.M.D. implementation.  Big business is globally-owned equity and the US isn't self sufficient in terms of either energy/mining or manufacturing/value addition, so a full blown trade war is economic suicide.  The US already has the most repressive and far reaching tax regime in the developed world, and it is only accepted because of the prevailing use of the dollar.

Tue, 07/12/2011 - 07:43 | 1447147 papaswamp
papaswamp's picture

NFIB report is out. -0.1 to 90.8.

"NFIB’s monthly Small-Business Optimism Index dropped one tenth of a point (0.1) in June, settling at 90.8, basically unchanged from the previous month. While some indicators rose slightly, including expected capital outlays, pessimism about future business conditions and expected real sales gains pulled the Index down, causing a small but disappointing drop for the fourth consecutive month. Although June marked the second year anniversary of the recovery, it appeared there was little happening to make small business owners more optimistic."

Tue, 07/12/2011 - 07:54 | 1447166 overmedicatedun...
overmedicatedundersexed's picture

anyone on ZH who wants to be intellectually honest must step back from the world view we have been brainwashed into accepting.

I am only concerned with USA.

the collapse of our economy is directly related to FREE TRADE and over regulation and taxation to pay for the socialist model.

Free trade is a socialist idea of equality of nations under one world gov systems.

25% Tarrif on MANUFACTURED goods could be reinstated yesterday..if this was done most of our tax and UE would be on tract to health.

Anyone who is against this is dull witted - ignorant of cause and effect- or a socialist.

As for energy the solution is also simple but the brainwashed cannot accept it;


2.production of nat gas in USA for use in vehicles all areas to oil drilling in USA.

Tue, 07/12/2011 - 09:31 | 1447438 Absinthe Minded
Absinthe Minded's picture

If the companies overseas had to deal with the shit we do it would be just. But they don't. Free trade. What a joke. Free for who?

Tue, 07/12/2011 - 08:12 | 1447205 rsnoble
rsnoble's picture

Didn't Bush make some comment 'in my line of business you have to keep repeating yourself so what im trying to say will finally sink in'?  "You like it in the ass, you like it in the ass, you like it in the ass, you like it in the ass."

Tue, 07/12/2011 - 08:17 | 1447215 rsnoble
rsnoble's picture

Btw i've been saying for sometime that the assholes at the courthouse will be the last ones to join the depression.  As small business gets screwed over and leaves one by one they'll just shift the burden----like my $700 a year luxury tax on a damn fishing boat.  Only when they can't juggle anymore will they start falling apart, the sooner the better.  Anything I do money wise I try and do under the table. Finishing up drive gates and fencing in the property.  While mostly to funnel the zombies to the next house it will also keep those nosy county workers the fuck off my property.  Most of them are not going to want to crawl over a barbwire fence with bull mastiffs on the othe side and a gun happy owner to boot.

Tue, 07/12/2011 - 13:11 | 1448173 sethstorm
sethstorm's picture

A few long-range rifles and air-to-ground weaponry is more than enough to overwhelm your house.

Tue, 07/12/2011 - 08:19 | 1447220 rsnoble
rsnoble's picture

Example of local tax stupidity........Sheridans frozen custard opens, runs baskin robbins out of business then a few years later can't pay it's taxes and closes.  Result---no ice cream in town now.  Burger king needed a new restaurant, closed the one here and built one 3 miles down the road in the next town.  Of course that didn't bother me as I got food poisoning off a whopper one time.  Pretty bad, shit 17x in a couple hours.

Tue, 07/12/2011 - 08:22 | 1447224 fiftybagger
fiftybagger's picture

For heaven's sake, you'd think from all the talk here that the center not holding would be a bad thing.  Think of all the vermin who will sent packing.  spooks and spies, gropers and goons, inspectors and protectors, lobbyists and liars, professors and their grants, TSA in your pants, shrinks in your head, feminists in your bed.  The list of blood sucking leeches is endless.  Let them all starve.  As far as I'm concerned it can't come soon enough.


Silver For The People

Tue, 07/12/2011 - 09:07 | 1447324 Widowmaker
Widowmaker's picture

Small business isn't hiring because every policy out of Washington DC is welfare for big business - particularly TAXES!!

Small business can't afford to be in business as government insulates the free market from fraud markets, where only big business has access, to both government and fraud rewarded.

Corporations that have the best politicians and Supreme Court money can buy.  How can any small business possibly compete?  They can't and won't.

Mission Accomplished, crotch-scans and terror-alert orange for all.

Tue, 07/12/2011 - 09:17 | 1447334 Bartanist
Bartanist's picture

Yup ... once again agreeing 100% with CHS.

Government, federal state and local regulatory, tax, banking and manatory insurance overhead have made it very difficult for small business to get enough traction to get over the hurdle, much less support one or more families.

In our false growth paradigm nation we have morphed into an environment where megacompanies using cheap foreign labor, cheap/free financing, corrupt tax breaks, freedom from costly litigation and favorable legislation to crush small competition ... and if a small guy ever does make it over the hurdle or gets assistance from the "money mafia" then they are expected to sell out and fade away quietly.... with their pile of fiat crapola.

Tue, 07/12/2011 - 09:28 | 1447410 cranky-old-geezer
cranky-old-geezer's picture

As long as Americans believe they gotta have employer-paid healthcare and employer-matching 401k and employer-paid tuition and employer-paid this and employer-provided that, Americans won't be competitive on the global job market. 

All this employer-paid stuff started during booming economic times when workers were in high demand, unions pretty much got their way, and manufacturing jobs couldn't be outsourced.

My ex-father-in-law worked for US Steel his entire working life, 40 years thereabouts. His benefits were mindboggling, full employer-paid healthcare, 13 weeks vacation every 5 years, stuff like that, and his retirement benefits were equally mindboggling.

I was in I.T. then, with nothing like the benefits he had.  He couldn't understand me having to pay part of my healthcare. He didn't understand it's a different world outside his cushy union-protected job.

I used to warn him things are going to change.  He wouldn't believe me. 

Shortly after he retired things started changing at US Steel and they eventually shut down most of the operation there.  He got out just in time.  He was lucky.

We're no longer in booming economic times.  Demand for workers has dropped drastically.  American workers still wanting all those employer-paid benefits are pricing themselves out of the job market.  Unions are pricing their members out of the job market.  Companies are responding by moving operations to cheaper labor markets overseas whenever possible.

It's not just government destryong the American job market.  It's workers and unions too.  

Tue, 07/12/2011 - 13:16 | 1448185 sethstorm
sethstorm's picture

So it's freedom for businesses, but slavery for workers?  No thank you, since the problem is that business is using the world to gain concessions from developed countries. 

When someone like yourself talks about competitiveness and global job markets, you treat that person like a thief about to mug you.   Then make sure nobody repeats the same thing.  

Tue, 07/12/2011 - 09:31 | 1447437 ex VRWC
ex VRWC's picture

May I introduce some musical commentary on globalization?


Tue, 07/12/2011 - 09:34 | 1447442 ex VRWC
ex VRWC's picture



Tue, 07/12/2011 - 10:12 | 1447570 bill1102inf
bill1102inf's picture

Jobs, lol.  In housing, the moneys already been made. Contractors that built houses with a cost of 80K that sold for $350K are sitting on PILES of cash.  The RE and Banker side of the house that made all those bonuses and commisions are also sitting on piles of cash.  The new bubble is in for profit colleges, teaching students skills they will NEVER be able to find a job with or use in the US economy. Anyone notice a pattern??? Where is THE EASY MONEY????  Wherever it is, you will find a bubble, corruption, etc.  have a lovely day

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