Don't think he was whining. He was simply telling it like it is. Sally was chosen because she was a 'median', which seems reasonable enough to make his point.
Turning it into a 'class' argument adds nothing. Ultimately all these costs become part of the price to the consumer, who pays higher prices without realizing why they are so high. Meantime, Sally accepts all these deductions because that's the way it is. It's essentially a con game. Harry From: [email protected] [mailto:[email protected]] On Behalf Of Lawrence de Bivort Sent: Wednesday, August 11, 2010 7:52 AM To: RE-DESIGNING WORK, INCOME DISTRIBUTION, EDUCATION Subject: Re: [Futurework] FW: Why I'm Not Hiring - Wall Street Journal; August 9, 2010 Good morning, everyone, Several things strike me about this article. I will assume the numbers stated are accurate. 1. This businessman seems not to realize that ALL economic activity (indeed, ANY activity per se) carries with it overhead costs. In businesses, because they have explicit accounting, the overhead costs become visible. The family, as a unit, also has overhead costs -- like entertainment; telephone, electrical, water, sewage and a multitude of other bills; food; education for kids; vacations; transportation; etc. etc., but typically, families fail to keep accounts accurately enough to be able to know what their overhead costs are. Indeed, besides businesses, very few of us have calculated the overhead costs of our activity units. So the whinings of this businessman have a certain compelling quality -- but only because we read them and are persuaded that this 'burden' is exceptional -- it is not. We all face overhead burdens from multiple sources. 2. Sensitive as he is to one source of overhead burden, state and federal government, he ignores other overhead costs that he incurs and over which he DOES have direct control: rent for his facility; transportation costs; cost of secretaries, receptionists, etc. He does not mention how much his company covers his personal perquisites, like his vacation time, his company car, his 'business entertainment', and who knows, his country club membership. 3. He fails entirely to discuss his personal "take" from the company: his salary, benefits, profit distribution, etc. Another way to look at this is that "Sally" is not receiving what her value is to the company, because part of that value is being siphoned off to pay her bosses' benefits: salary, benefits, profit distribution, perquisites, etc. (Of course, thanks to what we could call a Law of Overhead, NO employee will ever be paid "what they are worth", because part of their value-added will always go to help cover overhead.) 4. So his analysis lacks several key components that are necessary before his plea for sympathy can be credited. Yes, these are tough times. Good businessmen will look at the entirety of their operations to assess how to weather them, and it must be understood that the CEO and executive committee benefits should not be allowed to remain intact when the rest of the company is squeezed. But too many executives have the attitude that they have "worked hard and DESERVE their benefit", and they cry crocodile tears for the rest of the people in the enterprise who must shoulder not only their own share of the squeeze but their untouchable, above-the-fray bosses. Whenever I receive a junk phone call from some charity, the first thing I do is ask how much the CEO earns a year. Not once has the caller ever been able to answer that question, nor has an organization ever volunteered to find out. Michael Fleischer should have started this article with that vital information. Then he would have earned his right to whine.... Cheers, Lawry On Aug 11, 2010, at 10:21 AM, Arthur Cordell wrote: One reason why companies are slow to hire more full time employees. >From Steve Kurtz. From: Steve Kurtz [mailto:[email protected]] Sent: Wednesday, August 11, 2010 5:54 AM To: Arthur Cordell Subject: Why I'm Not Hiring - Wall Street Journal; August 9, 2010 Why I'm Not Hiring - Wall Street Journal; August 9, 2010 By Michael P. Fleischer With unemployment just under 10% and companies sitting on their cash, you would think that sooner or later job growth would take off. I think it's going to be later-much later. Here's why. Meet Sally (not her real name; details changed to preserve privacy). Sally is a terrific employee, and she happens to be the median person in terms of base pay among the 83 people at my little company in New Jersey, where we provide audio systems for use in educational, commercial and industrial settings. She's been with us for over 15 years. She's a high school graduate with some specialized training. She makes $59,000 a year-on paper. In reality, she makes only $44,000 a year because $15,000 is taken from her thanks to various deductions and taxes, all of which form the steep, sad slope between gross and net pay. Before that money hits her bank, it is reduced by the $2,376 she pays as her share of the medical and dental insurance that my company provides. And then the government takes its due. She pays $126 for state unemployment insurance, $149 for disability insurance and $856 for Medicare. That's the small stuff. New Jersey takes $1,893 in income taxes. The federal government gets $3,661 for Social Security and another $6,250 for income tax withholding. The roughly $13,000 taken from her by various government entities means that some 22% of her gross pay goes to Washington or Trenton. She's lucky she doesn't live in New York City, where the toll would be even higher. Employing Sally costs plenty too. My company has to write checks for $74,000 so Sally can receive her nominal $59,000 in base pay. Health insurance is a big, added cost: While Sally pays nearly $2,400 for coverage, my company pays the rest-$9,561 for employee/spouse medical and dental. We also provide company-paid life and other insurance premiums amounting to $153. Altogether, company-paid benefits add $9,714 to the cost of employing Sally. Then the federal and state governments want a little something extra. They take $56 for federal unemployment coverage, $149 for disability insurance, $300 for workers' comp and $505 for state unemployment insurance. Finally, the feds make me pay $856 for Sally's Medicare and $3,661 for her Social Security. When you add it all up, it costs $74,000 to put $44,000 in Sally's pocket and to give her $12,000 in benefits. Bottom line: Governments impose a 33% surtax on Sally's job each year. Because my company has been conscripted by the government and forced to serve as a tax collector, we have lost control of a big chunk of our cost structure. Tax increases, whether cloaked as changes in unemployment or disability insurance, Medicare increases or in any other form can dramatically alter our financial situation. With government spending and deficits growing as fast as they have been, you know that more tax increases are coming-for my company, and even for Sally too. Companies have also been pressed into serving as providers of health insurance. In a saner world, health insurance would be something that individuals buy for themselves and their families, just as they do with auto insurance. Now, adding to the insanity, there is ObamaCare. Every year, we negotiate a renewal to our health coverage. This year, our provider demanded a 28% increase in premiums-for a lesser plan. This is in part a tax increase that the federal government has co-opted insurance providers to collect. We had never faced an increase anywhere near this large; in each of the last two years, the increase was under 10%. To offset tax increases and steepening rises in health-insurance premiums, my company needs sustainably higher profits and sales-something unlikely in this "summer of recovery." We can't pass the additional costs onto our customers, because the market is too tight and we'd lose sales. Only governments can raise prices repeatedly and pretend there will be no consequences. And even if the economic outlook were more encouraging, increasing revenues is always uncertain and expensive. As much as I might want to hire new salespeople, engineers and marketing staff in an effort to grow, I would be increasing my company's vulnerability to government decisions to raise taxes, to policies that make health insurance more expensive, and to the difficulties of this economic environment. A life in business is filled with uncertainties, but I can be quite sure that every time I hire someone my obligations to the government go up. From where I sit, the government's message is unmistakable: Creating a new job carries a punishing price. Todd Fry ProBenefits USA, LLC 800.585.5802 toll-free 816.741.9307 desk 816.741.9418 fax [email protected] www.probenefitsusa.com <http://www.probenefitsusa.com/> CONFIDENTIALITY NOTICE: This e-mail and any files transmitted with it may contain confidential information, be protected by applicable laws and copyrights, or constitute non-public information. It is intended to be conveyed only to the designated recipient(s). 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