Sunday, March 28, 2010
Why a $14/hour employee costs $20
This article talks about how a worker making about $14 an hour actually has a cost of about $19.63 an hour. This higher rate includes fixed expenses as well as soft costs like the costs of hiring a new worker. With that being said, it's hard to convince business owners to hire no matter what incentives the government offers to try to reduce the unemployment rate. Payroll for workers is extremely expensive. A new hire actually decreases sales in the short run as they learn the job.
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This is definitely a big problem with trying to entice businesses to start hiring people again. I would imagine these costs would be lower with people who have higher education and are already partially trained for the job. As far as government incentives are concerned I think they need to focus more on training people to do their specific jobs so they don't cost as much to hire.
ReplyDeleteI agree with Nathan, but the new tax cut on hiring the unemployed is great.I feel that this will benefit not only the company for receiving tax cuts but for the millions of people who are unemployed and looking for a job.
ReplyDeleteThis article relates to what my Labor class discussed a couple weeks ago. Firms will try not to find new hires due to the quasi fixed costs involved in using a head hunter or other processes involved with hiring full time workers. This is why temp work and contacting has become a more popular form of work in the recent months.
ReplyDeleteI am curious whether firms that are big enough to have their own Human Resources departments that conduct their own hiring processes incur the same costs. There are obvious skills that a new hire will lack however does the offset of the cheaper cost for labor make it worth it to try and hire now? I understand the presence of the fixed costs and the reason why firms are hesitant however I feel that the small businesses, with the aid from the government, would be willing to make a few hires.
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