Tuesday, January 12, 2010

Many Firms Scared to Hire Because of New Taxes, Rules

A potential wave of new regulations and higher taxes may be scaring many businesses from hiring, prolonging any rebound in employment, CNBC is reporting.

The prospect of increased federal and state regulation and taxes has been particularly disruptive to the hiring plans of small- and medium-sized businesses, which have historically generated about two-thirds of the nation’s jobs.

CNBC has something here.

Not only is the Obama administration seeking to push through major overhauls of energy and health care policy, it is also expected to impose dozens of new workplace rules and raise income taxes. How can a firm take on new employees if it doesn't know what the cost of those employees is going to be?

Uncertainty is one thing but uncertainty about your employee cost structure means you are simply adding unknown risk that could end up being extremely burdensome. This government created uncertainty may be as damaging for the employment situation as was the attempt during the Great Depression to prop up wages above market rates.

1 comment:

  1. Robert Higgs calls this "regime uncertainty" and relates the current developments to the formation of the National Recovery Administration during GD I and all of the rule-changing, price and wage controls, etc. that followed.