Michael P. Fleischer, President of Bogen Communications, offers a business owner’s perspective on the costs of hiring new employees in the current economic environment. He walks through the costs of hiring a hypothetical employee (Sally), explaining why it costs his business $74,000 to pay someone a $59,000 salary, of which they will only keep $44,000, with $12,000 in benefits). Where does the extra money go? Various taxes and insurance premiums, including unemployment and disability, workers’ comp, and so on. Each item may be reasonable in itself, and some are quite small, but they add up.
In Fleischer’s view, these added costs increase his firm’s vulnerability to government decisions — and not just those made in Washington, D.C. While not all of the non-salary costs are due to government policy — Bogen could offer less generous benefits — many are, and this means firms like Bogen “have lost control of a big chunk of our cost structure,” and this makes Bogen reluctant to hire more. Fleischer concludes:
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.
UPDATE: More here. (Hat tip: Professor Bainbridge)