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Thursday, September 8, 2011

Unemployment and the Economy

I have talked to a few "small business" owners over the last month.  I've asked them what most affects their hiring decisions.  Is it taxes?  Is it regulations?  Is it demand?

These are owners of businesses with 100 to 200 employees, focused on manufacturing and importing.  The answer is always demand.  Some noticed a clear drop in demand when gas prices last went up.

They would like lower taxes, and there are regulations that are onerous.  Some regulations seem stupid.  Others make sense and the fact that they apply to everyone in a particular market is seen as a good thing.  A lot of regulations are complex and require hiring consultants to help assure compliance.

But it comes back to the need for demand.  Without demand there is no growth.  Without demand there is a need to reduce labor or reduce hours.   Sometimes both are required.  Construction companies have been particularly hard hit with the real estate collapse.  Hiring requires orders to build.

I come down on the side of government efforts to stimulate demand, through creating jobs that our society needs to have done.  Rehabilitating existing infrastructure and developing new infrastructure are real needs. They offer the opportunity to hire people who in turn will purchase goods and services from others. We should also look at simplifying our tax system and at revising and sometimes simplifying regulations that are onerous.