Guest Post: Dear Person Seeking a Job: Why I Can't Hire You

Tyler Durden's picture

Submitted by Charles Hugh-Smith of OfTwoMinds blog,

Potential employers have to respond to the incentives and disincentives that exist in today's world, and those do not favor conventional permanent employees.

I know you're hard-working, motivated, tech-savvy and willing to learn. The reason I can't hire you has nothing to do with your work ethic or skills; it's the high-cost Status Quo, and the many perverse consequences of maintaining a failing Status Quo.

The sad truth is that it's costly and risky to hire anyone to do anything, and "bankable projects" that might generate profit/require more labor are few and far between. The overhead costs for employees have skyrocketed. So even though the wages employees see on their paychecks have stagnated, the total compensation costs the employer pays have risen substantially.

Thirty years ago the overhead costs were considerably less, adjusted for inflation, and there weren't billboards advertising a free trip to Cabo if you sued your employer. (I just saw an advert placed by a legal firm while riding a BART train that solicited employees to sue their employers, with the incentive being "free money" for a vacation to Cabo.)

The other primary reason is that there are few (to borrow a phrase used by John Michael Greer) "bankable projects," that is, projects where hiring another worker would pay for the costs of the additional overhead, labor and capital and generate a reason for making the investment, i.e. a meaningful profit.

There is very little real "new business" in a recessionary, deflationary economy: any new business is poaching from an established business. The new restaurant isn't drawing people from their home kitchens, it's drawing customers from established restaurants.

The only competitive advantage in a deflationary economy is to be faster, better and cheaper or have a marketing and/or technology edge. But marketing and technological advantages offer increasingly thin edges. The aspirational demand (driven by the desire to be hip or cool) for a new good or service has a short half-life. As for technology: miss a product cycle and you're history.

Put these together--higher costs and risks for hiring people, and diminishing opportunities for expansions that lead to profit--and you have a scarcity of projects where hiring people makes financial sense.

Faster, better and cheaper usually means reducing the labor input, not increasing it. In a deflationary economy, it's extremely difficult to grow revenues (sales), and as costs continue climbing inexorably, the only way to survive is to cut expenses so there is still some net for the owner/proprietor to live on.

Consider the tax burden on a sole proprietor who might want to hire someone. The 15.3% Social Security/Medicare tax starts with dollar one. After the usual standard deductions, the Federal income tax is 15%, and 25% on all earned income above $34,800. My state tax is around 5%. Since every other advanced democracy pays basic healthcare coverage out of tax revenues, the $12,000/year we pay for barebones healthcare insurance is the equivalent of a tax. That's 15% of our income. Property tax is also $12,000 annually, so that's another 15%.

Above $35,000 in income, my tax burden is 15% + 25% + 5% + 15% + 15% = 75%. You can imagine how much money I would need to clear to be able to afford hiring someone. The number of businesses that generate huge sums of profit are few and far between, and the number of businesses that scale up from a one-person shop to mega-millions in revenues is also extremely limited.

The potential employer is faced with this reality: the money to hire a new employee will come out of my pay, at least at first. Hiring an additional worker only makes sense if the new employee will immediately generate enough additional revenue to fund his/her own wage and overhead costs, the added expense of supervision and a profit substantial enough to offset the risks.

I should stipulate that my knowledge of hiring people and being an employer is not academic. My partner and I launched a business in late 1981, in the depths of what was at that time the deepest recession since the end of World War II. We had a very diverse ethnic workforce and did millions of dollars of work. Rather than make a fortune I lost $50,000 and had to mortgage the house we'd built by hand to make good all debts. I exited in 1987 with my personal integrity intact: nobody lost money working for us.

The losses were basically the result of me pushing the outer boundaries of my experience and thus my competence in an unforgiving, very competitive environment. The learning curve in business is steep and pricey.

I have also been involved in saving/managing a small non-profit organization that had expanded payroll far beyond what the organization's revenues could support.

What newly minted employers understand that employees rarely understand is that the overhead costs of hiring even one person do not scale at first. To hire one person, even part-time, the employer needs to set up a complex infrastructure to manage the payroll taxes and accounting, and comply with a variety of statutes. If the employer does not follow the many laws regarding labor, witholding taxes, workers compensation, liability coverage, disability insurance, unemployment insurance and so on, then the employer is at risk of penalties and/or lawsuits.

If a business does $1 million in gross receipts a year and already has five employees and a manager, it's not that burdensome to hire a seventh employee--the framework is all set up. But the cost of setting all that up for employee #1 is not trivial, especially when you realize the complex machinery all has to be overseen and managed.

In the Silicon valley model, a couple of guys/gals work feverishly in the living room/garage until they have a product/service to sell to venture capital. If the pitch succeeds, the VCs give them a couple million dollars and they hire a manager to sort out all the paperwork, management, etc.

Most small businesses/proprietors don't get handed a couple million dollars. They have to grow organically, one step at a time. Each expansionist step is fraught with risks, especially when opportunities to grow revenue are few and far between and are generally crowded with competitors.

Thirty years ago the employer's share of Social Security tax was not today's 7.65%; it was much less. Worker's compensation rates were lower, as were disability and liability insurance rates. Adjusted for inflation, healthcare insurance was half (or less) of today's absurdly expensive rates. To pay someone a modest $20,000 annual salary today would cost at least $30,000 in total compensation costs, and if the employee is middle-aged or requires family healthcare coverage, it could easily exceed $40,000. That sum many be trivial in the bloated $3.7 trillion Federal government or in Corporate America, but in millions of small businesses that $40,000 is the proprietor's entire net income.

In other words, as costs of hiring anyone to do anything have climbed while revenues have stagnated, the threshold to hire an employee keeps getting higher. Back in the day, I could hire a young person out of high school for a modest cost in overhead, and the work-value they produced to justify the expense was also modest. I could afford to hire marginal workers and as long as they didn't get in the way too much and ably performed basic tasks then I could afford to have them on the payroll.

The same was true of older workers, veterans living on the beach who wanted work, etc.--I could afford to give all sorts of people a chance to prove their value because the costs and risks were low.

That's simply less true today. The costs and risks are much, much higher.

Liability has become a lottery game where anyone with assets or income is a target for "winner take all" lawsuits. I would have to be insane to hire someone to work around my property on an informal basis: if the person injured himself, I would face the risks of losing my property to the legal defense costs and potential settlements that exceed the homeowners' insurance policy.

In an office environment, I could be sued for harassment or for engendering a "stressful work environment." If you think these kinds of cases are rare, you need to get out more.

Simply put, the feeble hope of increasing revenues does not even come close to offsetting the tremendous risks created by having employees.

There's a Catch-22 aspect to all this; small business can't expand revenues without employees, but the costs/risks of having employees makes that a gamble that is often not worth taking. The lower-risk, lower-cost survival strategy is to automate everything possible in back-office work and free up the proprietor's time to grow revenues that then flow directly to the bottom line.

Managing people is not easy, and it's often stressful. Once a proprietor hires an employee, he/she must wear a number of new hats: psychiatrist/counselor, manager, coach, teacher, to name but a few. Frankly, I don't need the stress. I would rather earn a modest living from my labor and avoid all the burdens of managing people. (In my case, that included bailing workers out of jail, loaning them my truck which was subsequently rolled and destroyed, and a bunch of other fun stuff.)

I am not embittered, I am simply realistic. I enjoyed my employees' company, even the one who rolled my truck and the ones who managed to get into trouble with the law. But I got tired of meetings and all the wasted motion of office management, and I got tired of taking cash advances on my credit cards to make payroll.

If anyone out there thinks being an entrepreneur/small business proprietor is easy and a surefire pathway to the luxe life, then by all means, get out there and start a business and hire a bunch of people. I applaud your energy and drive, and sincerely hope you are wildly successful.

I hope you now understand why so many businesses only want to work with contract labor/ self-employed people: having employees no longer makes financial sense for many small enterprises. What makes sense is paying someone a set fee to accomplish a set task, and that's it, the obligation of both parties is fulfilled. If the task isn't completed, then the fee isn't paid.

Revenues just aren't steady enough in many cases to support a permanent employee. When the work comes in, then contract labor is brought in to get the work done. When it's done, they're gone, and all their overhead costs are theirs.

It's extraordinarily difficult to generate revenue in a deflationary economy, and extraordinarily difficult to scrape off a net income as expenses such as taxes, insurance, healthcare, etc. continue climbing year after year.

Self-employment places a premium on professionalism and results. Unlike offices filled with managers and employees, nobody cares about your problems, conflicts, complaints about the common-area fridge or your attendence at meetings. Once you've been self-employed for a while, and you only hire/work with other self-employed people, then you look back on conventional work places as absurdist theaters of schoolyard politics, tiresome resentments and child-parent conflicts acted out by self-absorbed adults.

Once you're self-employed, your focus shifts to nurturing a productive network of clients, customers and like-minded, reliable, resourceful self-employed people who will give you work/work for you when you need help. Building trust and following through on what you promised to do become your priority.

The economy is different now, and wishing it were unchanged from 30 years ago won't reverse the clock. We have to respond to the incentives and disincentives that exist in today's world, and those do not favor conventional permanent employees except in sectors that are largely walled off from the market economy: government, healthcare, etc.

But these moated sectors cannot remain isolated from the deflationary market economy forever, and what was considered safely walled off from risk and change will increasingly face the same market forces that have changed private-sector enterprise.

If you want security and a steady income, it may be more rewarding to build it yourself via highly networked self-employment.

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
surf0766's picture

All your jobs belong to us now

HelluvaEngineer's picture

One day we will all work for JPM, but by then we'll just call it "the Government"

Mr Lennon Hendrix's picture

July 13th = Silver Bomb!

Buy as much as you can afford that day!

Buy Silver - Crash JPM!

Take back your wealth from the hands of the bankers!

Buy silver!

economics9698's picture

It cost $10,300 in 2008 to hire someone due to federal regulations.

AldousHuxley's picture

Take a single worker with $100,000 productive value...

EMPLOYEE pays 7.65% FICA taxes, 0-10% state/local income taxes, 21.5% federal taxes....almost 39% is TAXED on income

PLUS your employer also pays 7.65% FICA taxes, 1% FUTA, 5-13% SUTA which the cost is passed down to worker.

 

so pretty much half of worker's revenue is TAXED.

 

Then consider after tax taxes like

  • real estate TAX on a decent home/condo/rathole in safe neighborhood (at least $1000~$10000 per annum)
  • job prep tax (aka. college degree) ($7000~$15000 per year)
  • gas TAX for commuting ($500 per year)
  • driver's license + vehicle registration + smog check + auto insurance for getting to work ($1000 per year)
  • sales TAX on your living expenses like soap and clothes ($500 per year)
  • cell phone TAX

which adds up to around $20k in job related COSTS to worker paid with post-tax dollars which is more like $30k in  pre-tax income.....

so the worker is left with $20k to actually spend which pretty much goes to food and mortgage.

 

worker is left with no room for much discretionary spending. they used to call these folks indentured servants.

 

AldousHuxley's picture

TAX IS WORKER'S LARGEST EXPENSE as % of INCOME.

 

TAX gets spent by Congress with approval rating 17%

 

 

CPL's picture

I've been told all my life that freedom isn't free and I'll remain free as long as I pay my taxes.

 

That's who is running the show.  The lunatics.

AldousHuxley's picture

you can't be free when you don't even own your own labor. TAXES give government 50% ownership of your labor.

 

basically you pay 50% taxes to be 50% slave.

 

in4mayshun's picture

More like 50% tax to be 100% slave.

Colombian Gringo's picture

I have a suggestion. Flakmeister believes in global warming and is in favor of carbon abatement.   As we all know, humans are a major source of carbon pollution.  Plus if you have been on any bus, you will notice the smell. So I suggest that we hire him to visit buses, apply his lips to the seats and suck out the carbon pollution.  This is a win win win. We win because we give someone with a useless education a job and don't have to listen to his BS, buses will smell better, and we can stick a cork in his ass to trap the emissions.  When Flakmeister is 'full' we will send him in to invade Iran and stink the mullahs out of existance.

AldousHuxley's picture

global warming, carbon tax is to save American jobs.

 

It is to penalize countries like china who has advantage of surplus cheap labor which US knows she cannot compete. They are trying to set the manufacturing bar high that China has to pay for the higher standard.

 

plus wall st. wants another exchange to "trade" in dollars.

 

not necessarily a bad thing when US sets the rules of engagement.

 

 

Everybodys All American's picture

carbon tax is to save American jobs? No it's only use is to pay back the "green" exchange initiatives that Gore and Co. have ownership over.

AldousHuxley's picture

as long as americans control it they can spin it whichever ways.

 

who gets what carbon credits? how about black box carbon credits? that's my guess. Sure Gore will benefit and so will goldman sachs.

 

but in the end US government is all about control. they want China to pay US taxes for polluting and buy Japanese environmental tech products, etc.

Everybodys All American's picture

China is not going to comply any more than Gore will give up his Lear jet travel. Look. The whole Carbon tax is pure bs. You realize without carbon (CO2) there would be no life? It's the most insane democrat idea yet. Gore pushes this shit because he owns the mechanisms for the exchange and now trys to convince all that the science is on his side. Let him stop flying his lear jet everywhere first or airing his 20,000 sq ft home and then I might listen.

AldousHuxley's picture

no different than any other tax.

Beijing wants the carbon tax.....on the consumers not producers...therefore passing the buck back to US.

nmewn's picture

In the realm of taxation, there is no mechanism in place or ever devised to prevent "a producer" from passing on any new government tax down to the consumer level through higher prices.

If there is...I want to hear it.

AldousHuxley's picture

you don't pay consumption tax when you don't consume.

 

Chinese won't pay consumer tax because they won't buy their own goods, so tax burden is on consuming western countries...so carbon tax becomes net tax on America.

 

but if the tax is on producer side, Chinese pay more taxes than America because they produce more than what America consumes, so it is net tax on China.

 

 

nmewn's picture

???

"you don't pay consumption tax when you don't consume.".

China has a VAT (end consumer pricing), a consumption tax (end consumer), and a straight up business tax (always a pass through to consumers in pricing).

China doesn't consume anything?

Thats news to me.

AldousHuxley's picture

america is net consumer, china is net exporter.

 

 

 

 

 

 

AnAnonymous's picture

China doesn't consume anything?

_____________________

US citizen nice touch or how strawsmen are invited to the party.

China consumes one third of its production and exports 2 thirds of its production.

Following that, it gives that taxing production would tax a one hundred chinese base while taxing consumption will tax a one third base.

US citizenism at work.

Hard to admit that the constantly bashed US citizen elite is working to preserve the best interests of the US citizen middle class when the struggle of the US citizen elite has no positive effect for yourself.

US citizens moaning their loss of US citizen status.

Too many US citizens, not enough Indians to rob from to maintain US citizens in their entitlements.

nmewn's picture

Its like trying to interpret ramblings of a dyslexic child.

akak's picture

Correction: an autistic, dyslexic, xenophobic, emotionally disturbed, sociopathic child on crack.

Stock Tips Investment's picture

This happens when the government spends each day more and is forced to "charge" that is easier to do. At the end of the day, threatens employment and therefore against their own income. Worst of all is that the same is applied by many developing countries without any success, as they are still "developing."

erheault's picture

You havent even scratched the surface of tax raids , As of Jan 1 we get 20 new taxes and also the great Zeros medical tax ( not a tax according to him but the supreme court called it a tax) if so why is the IRS hiring 16 thousand new workers to handle the Not a tax,  Anybody that votes for any of the ones who have done this to us deserves to become the sheeple who will pay the rest of their lives and receive the misery that will be coming down the pipe. 

bobnoxy's picture

''It cost $10,300 in 2008 to hire someone due to federal regulations.''

That damned Obama!...oh, he came in when?...never mind.

CH1's picture

Step away from the Blue/Red poison.

Hopeless for Change's picture

He came in January 2009.  So what.  In order for a comparison, you need 2 different samples.  Let's see how much it costs in 2013 with the new Obamacare taxes and other "redistribution of wealth" tactics.  Go ask David Axelrod what to post next.

Peter Pan's picture

An Australian father a few days ago placed an ad in the newspaper offering a year's supply of beer valued at $1700 to anyone who would employ his son as an apprentice electrician.

Governments have killed fexibility and stifled profitability with plenty of red tape which makes you feel as if hiring someone is a crime that must be punished.

AldousHuxley's picture

training young apprentice is not profitable so nobody wants to do it.

government only does it when they can tax new workers more.

 

 

 

HungrySeagull's picture

It's going to take a awful alot of beer to get through the training.

I have seen temp workers sent into the jungle armed with nothing more than a 20 minute video tape.

AldousHuxley's picture

job requirements for temp workers:

 

must be able to think on your feet and bullshit well.

 

 

HungrySeagull's picture

Say hello to everyone and remember their names.

When your job is finished, go home. Don't dawdle.

Temps vary by experience. Some are low IQ and are good for basic task on command. (That's right, one task singular) And a few can be leading other temps.

And remember this if anything.

"I am just a temp. A failure of your Company's equipment is not my problem; so don't curse me out."

And never never never... no matter what swing at the customers who treat you badly.

potlatch's picture

Wasn't that a Chris Farley / Adam Sandler skit?

Harbanger's picture

Australia is a huge fucking prison.

Stoploss's picture

Due to federal regulations, it now costs $103,000 to hire someone.

HungrySeagull's picture

Money makes the world go round.

The day money stops...

AldousHuxley's picture

California Republican governor candidate Meg Whitman's illegal mexican maid got paid

$25/hour wage

$25 x 2000 hours = $50,000 salary

NO FEDERAL TAX, NO FICA, NO STATE TAX PLUS QUALIFY FOR ALL KIND OF BENEFITS

 

so that salary is equivalent to American making $80,000/year which is nearly twice the US median HOUSEHOLD income.

 

for someone with no more than high school education, no more pressure than dusting some shit in a huge home rich people are never around, it is better deal than most American college graduates job prospects.

 

 

 

 

AldousHuxley's picture

uhh....the maid sued Meg Whitman and went on a tell-all nearing election time.

 

frankly, she overpaid.

TBT or not TBT's picture

post facto we can say she made a poor choice there, considering she later had trouble because she ran for governor, and the media has a double standard for republicans.    Nobody expects democrats to abide by laws or morality overmuch.   She ran has a republican, however.  

An aside here, once regulations and taxes become so ridiculous as they have been in Europe for some decades, a culture of cheating, and acceptance or even adimiration of cheating, becomes rampant, and the squeaky clean, the actual squeaky clean rule following boy scouts, are considered as fools by the rest, and fail, fail, fail, because their costs are higher.     This moral slide starts first with the leftists and left leaning, because that whole vibe is about splitting with traditional values and old rules.   Witness the left and the media's nonchalance about sociopath Clinton's sexual harassment, rape, and sexual antics with very young interns on the Oval Office broadloom.

Everybodys All American's picture

take a read of Saul Alinsky.

You'll have a much greater appreciation of the new democrat ...

http://www.crossroad.to/Quotes/communism/alinsky.htm 

The Alarmist's picture

Yeah, but just try to hire an American to do housework these days ... If you find one who will actually do the work, then the fact that they are documented opens you to all the probs pointed out above.

AldousHuxley's picture

maid work used to be done by your wife......TAX FREE, MINIMAL COST (no car, no college debt, etc.), 24/7 availability.

 

Rockefellers pushed feminism (Ms. Magazine was funded by CIA) in order to get untaxed housewives into the labor market to be taxed.

 

Now your wife's earnings are taxed at near 50%, and if you subtract child care costs, then she is basically working for free unless she makes north of $100k/year. Even then, she can get laid off. Whereas if she developed cooking skills, you get $30pp value delicious meal without sales tax, tips, and income tax at home and skills are inflation proof way into retirement age.

 

Plus these days with all the machines doing the work, there isn't much housework if you keep your self organized, dont' hoard uselss shit, and don't buy some 5000sqft ugly McMansion.

_SILENCER's picture

Rockefellers pushed feminism (Ms. Magazine was funded by CIA) in order to get untaxed housewives into the labor market to be taxed.

 

This is absolutely true. They kicked their revenues up to mind blowing levels after they had the rest of the adult population slaving away for them, under the guise of liberation.  Now, don't get me wrong, if a woman isn't raising kids she ought to be raising cash, but the insidious nature of the scam perpetrated upon them is typical elitist, fuedal scumbag mentality.

 

I'd really like to unfuck myself from my goddamn social security number and stop paying these motherfuckers.

potlatch's picture

You never would find Gloria Steinem far from Langley, true.  But this is true of the entire cohort: "jet-setting" was just company parlance for the orbital network by which our operators eventually, if needed, would from time to time board Rumsfeld's lightship, for direct instructions and/or consulations with starfleet.

 

Given the magitude of her particular operation, I am quite sure her and Ambassador Rumsfeld are on old friendly terms, and have hsared many a fine sheryy whilst in his preferred high orbit.

Híppos Purrós's picture

..."true of the entire cohort"...  PotLatch

Correct, PotLatch...  Did you know that TheCompany's precursor was the OSS...  which was, for those offended by it's IvyLeague/OldMoney 'tilt', jocularly referred to as "Oh,SoSocial!"...

"PotLatch!"  GreatHandle.  You must be PacificNorthWest.

Malachi Constant's picture

+10.

Feminism and massive promotion of homosexuality started in 1972, when the big boys realized the Earth is finite. Look for a book called "The Limits to Growth" by Aurelio Peccei of the Club of Rome fame - it's their bible.

Cathartes Aura's picture

yo, Malachi - "feminism" predates "1972" by a few centuries - stop it with the Rush Limbaugh College dissertation.

in 1792, Mary Wollstonecraft wrote her Vindications,

A Vindication of the Rights of Woman is one of the earliest works of feminist philosophy. In it, Wollstonecraft argues that women ought to have an education commensurate with their position in society and then proceeds to redefine that position, claiming that women are essential to the nation because they educate its children and because they could be "companions" to their husbands rather than mere wives.[80] Instead of viewing women as ornaments to society or property to be traded in marriage, Wollstonecraft maintains that they are human beings deserving of the same fundamental rights as men. Large sections of the Rights of Woman respond vitriolically to conduct book writers such as James Fordyce and John Gregory and educational philosophers such as Jean-Jacques Rousseau, who wanted to deny women an education. (Rousseau famously argues in Émile (1762) that women should be educated for the pleasure of men.)[81]

http://en.wikipedia.org/wiki/Mary_Wollstonecraft#Vindications

she wrote a Vindication of the Rights of Men too - educate yourselves lads, stop relying on bitter old drug addicts to tell you what to think, encouraging the dumb.

michigan independant's picture

 Lilith, however, considering herself to be Adam's equal, refused. Depends on culture.