Skip to comments.Blame me for job losses (a businessman explains why businesses don't want to hire today)
Posted on 12/13/2008 8:50:55 AM PST by SeekAndFind
When the jobs report for November came out last week, many so-called "experts" were shocked at the massive loss of an estimated 533 thousand jobs. Even a Time /CNN organization called "The Curious Capitalists" were at a loss to explain it.
Let me attempt to help out these "curious capitalists" (though I am still skeptical that anyone working for CNN or Time is either curious or a capitalist). I caused part of this job loss and I know precisely why; the election. The results portend big trouble for small business.
The job destruction process has started. We are about 20% of the way through our ramp down process and on schedule to complete the shut down by spring 2009. Watch the financial news and you will see continued job cuts each month. We are not alone in our strategy. Far from it. Atlas has shrugged all over the country.
Like many business owners, we are no longer willing to take all of the financial and legal risks and put up with all of the aggravation of owning and running a business. Not with the prospects of even higher taxes, more regulation, more litigation and more emboldened bureaucrats on the horizon. Like others we know, we are getting out while the getting is, well, tolerable. Many who aren't getting out are scaling back.
We learned just this week that getting out of business is harder than we thought. Take Republic Windows & Doors of Chicago, where being out of money and out of paying customers apparently does not give a business the right to shut down. Nor does it give that business' bank the right to withhold credit. According to the unions, Jesse Jackson and the Governor of Illinois (yes, THAT governor), this company must continue to pay its employees salaries and benefits.
But pay them with WHAT? Liberals seem to be clueless as to where "the money" comes from. They love to tax, regulate and redistribute wealth -- all the while decrying the very profit motive that created it -- something they do not understand. If they did, they would not naively insist that a business that is out of money, out of customers and out of credit stay open so as to pay employees.
And that is but one example of why the lay-offs of November 2008 - which will be part of George W. Bush's statistical record - fall in reality on the Obama election. Business owners understand that the election of 2008 just gave a lot more power to people who think like these liberals in Illinois. For crying out loud, an Illinois liberal is now "President elect" and he chose another one for his Chief of Staff. He chose Michigan liberals for his economic team. Illinois and Michigan are broke!
It is no secret that owners circulated endless emails leading up to election day discussing lay off plans were Obama to win. Entrepreneurs instinctively understand the danger posed by larger liberal majorities in power. The risk-reward equation and fierce independence spirit of start up businesses are anathema to the class warfare, equality of outcome and spread the wealth mentality of the left.
We have very little appetite to have our lives run by elected or un-elected officials like Barney Frank and Jamie Gorelick. We have no appetite to be taxed even more by the likes of Charlie Rangel. These clowns destroyed Fannie Mae, Freddie Mac and our entire economy as a result. Congress, by their own admission, cannot even run their own damned dining room with a captive customer base! Some of them refuse to pay their own tax burden. Why in the world would we subject ourselves to their ilk armed with the unchecked powers of the Oval Office and both houses of congress and a massive army of bureaucrats?
We got into business to be independent. We will get out for the same reason.
The fact that Obama is not in office yet is irrelevant. Businesses must see "around the corner" and plan accordingly. Rightly or wrongly, business owners see a huge anti-business shift in motion and they are making preparations NOW. We do not want to have business illiterates like Chris Dodd dictate our decisions from the comfort of his home made possible by a quid pro quo Countrywide mortgage.
(As the owners of Republic Windows are finding out, government will nose their way into your business even if you are not thriving.)
Most of the kind of people who start and run businesses are by definition trying to opt out of depending on anyone else -- be it a large corporation or government -- for their welfare. We take on tremendous risks and responsibilities. We do so expecting a better than average return. Since we require nothing from government, most of us deeply resent and resist being pestered by government.
For nearly 30 years, I have been one of these business people. It was an amazing journey and literally involved blood, sweat and tears. But now I am done. This election screams that we are going to see a deterioration of the risk-reward equation and the ability to be left alone. Apparently, any appreciation of our crucial place in the economy is lost on over 50% of the voters as well as those they elected.
So, like many business owners, I will "stay home" so to speak. Others more brave than I are opting to try and stay in business by cutting way back on purchases and payroll. They have already started. They are not waiting for the little sign on Obama's lectern to be updated to the official Presidential seal. November 2008 job losses belong to "The Office of the President Elect." I know. I caused some of them, and I know why.
READ THIS :
Have you ever heard of Republic Windows And Doors? Unless you live on the North Side of Chicago, you probably havent. But theyre at the heart of what is becoming a textbook case in government overreach and willingness to interfere in private business dealings. And no less than the Man of Destiny himself, Barack Obama, has waded into this swamp, with both feet.
Republic is a family-owned business that has been operating since 1965, and had 700 employees as recently as two years ago. On Friday, they closed their doors forever.
Republic is a small-business victim of the credit crunch Ive been telling you about here for sixteen months now. Their business of making new and replacement windows fell off sharply, along with the collapse of the residential construction industry. This is a sad story, which sadly will be repeated many, many times across America in the months and years ahead.
Republic did their banking with Bank of America, which pulled a line of credit from the company late last week, forcing them to close down. Thats what happens in a credit crunch. Now there isnt enough public information to give you a full picture on the negotiations and other dealings that led to this point, and the companys website has vanished behind a firewall.
The bottom line is that Republics business has largely evaporated. Thats not their fault, nor is it BoAs fault, but it does mean that it makes no sense whatsoever for the company to continue drawing on credit lines, and it means that it makes no sense for BoA or anyone else to continue extending the credit. You simply do not lend money when its not likely youll be repaid. If you were a shareholder of BoA, thats the very last thing youd want them to do. Banking isnt charity.
When youre forced to shut down a business in a hurry, you make life hell for your employees. And Republic find themselves in the evil position of having to dismiss 300 employees, right before the holidays.
Except that 260 of these employees are represented by the United Electrical, Radio and Machine Workers. Now looking back over the recent history of this company, which has included several recapitalizations and management changes, you have to figure that they had a lot of trouble matching costs to the realities of their business. This is more or less the natural state of affairs when you have a union, as the Big Three automakers could tell you.
Would this company still be in business if their workers werent organized? Good question, although their management dont seem to have been prizewinners either. But leave that to the side.
What the union is doing now, is literally occupying Republics production facilities and refusing to allow themselves to be locked out. In effect, the company cant shut down because their workers wont let them.
The union is demanding 60 days severance and vacation pay for all the affected members of the union. Theyre citing a Federal law that requires companies to give 60 days notice before closing a plant. But the law contains exceptions for unforseen circumstances, and Im sure all of this will get thoroughly aired in the months of ugly legal proceedings to come.
Now, at long last, we come to the nut of the story, and why Ive recited it all to you here.
The union has decided that Bank of America is to blame for the fact that Republic Windows And Doors is going out of business. Accordingly, theyre demanding that BoA lend enough money to Republic to pay out the 60 days severance and vacation pay to the unionized labor.
When I first heard this story a few days ago, I thought what youre thinking now: boy, this is stupid. The bank isnt liable for a business failure, and they cant flush their own money down a rathole, for a large number of very good reasons.
But that wasnt the end of the story. Illinois governor Rod Blagojevich said that his State does business with Bank of America thats worth hundreds of millions of dollars in fees and commissions. And that the State of Illinois would pull their business from Bank of America unless they funded the unions demands.
This is also incredibly stupid. You dont poke your nose into the dealings of private businesses if no laws were broken. And Blagojevich knows that.
And then it got even more stupid yet. Barack Obama, no less, was asked about the situation in a press conference on Sunday. And he expressed support for the workers. He was quoted in various wire stories to the effect that his plans and programs would need to get money out the door and help ordinary people.
Fair enough, Mr. Obama. And I know as well as anyone that the ongoing efforts to stabilize the financial system have been mysteriously unsuccessful at getting banks to start lending again. (Well, its mysterious to some people, maybe. Not to anyone whos ever seen the inside of a bank.)
But the President-elect of the United States has implicitly given his support to an attempt by the State of Illinois to blackmail a private corporation into modifying the way it makes business decisions.
Now this tells you one of two things about Barack Obama: either hes incredibly unaware of the effect that his words have, now that hes the President-elect. Or, which would be far worse, he actually believes that its appropriate for Illinois to strong-arm the Bank of America into flushing its depositors money down a toilet, in order to get an ugly but isolated situation out of the headlines.
The President-elect needs to stand up and clarify which of these two possibilities is the truth.
But still, all of this is in the realm of the stupid and un-noteworthy. Im about to tell you why its not stupid at all. Instead, its something that should frighten the heck out of you.
The reason you need to be frightened about the behavior of a grandstanding Governor and a clueless President-elect, is to be found in the rationale being given for why Bank of America should be required to pay severance to the workers who lost their jobs.
It goes back to the TARP financial bailout plan. Bank of America is one of the companies who, on October 13, were informed by Treasury Secretary Paulson that they would be required to sell big chunks of preferred stock to the government. The point of this was to ensure that the key players in the banking system had adequate capital. (In fact, many of the biggest are now overcapitalized, far beyond historical norms.)
Bank of America was forced to take about $15 billion in new capital at that time, and had to submit to a raft of new restrictions on its business, including limits on executive pay. (According to a timeline published by Republic Windows and Doors, this was just two days before the negotiations began, that finally led to Republics failure.)
READ THE REST OF THE STORY IN THE ABOVE LINK. Just as the government helped cause the mortgage crisis by COERCING banks to lend under duress, they are now doing the same for business that are in financial trouble.
Who is going to want to start a business and hire under such circumstances ?
No amount of bravery can overcome the massive bleeding that will take place under Comrade Obama.
This is a terrific post. It spells a lot of things out for us economic ignoramuses.
May as well, can't find a job...
Employees don’t understand business either. They actually are happy that less customers walk through the door so they can collect their checks without actually working.
Atlas is shrugging.
I’d bet that a temp agency that hires illegal aliens who are going to be the workers in Obama’s work programs will do well...
Long story short.
Republic became unionized, costs tripled, quality suffered, work rules made it impossible to compete.
The owners have already started a new company, making the same, but higher quality product, in a non union shop. They will do just fine.
The union(s) are 100% at fault for this failure, and don’t let anyone ever tell you different.
Politicians and unions conspire to destroy private business every day, by the same methods, and for the same reasons that the Mob collects ‘protection money’.
Pretty good indication why government is 90% union represented.
Only by the grace of GOD can we survive...
Maybe a used car biz. Who is going to want electric golf carts they will push on us?
I’m surprised that this business didn’t know about this law its been around for quite a while. http://www.doleta.gov/programs/factsht/warn.htm
I wish I would have wrote this..it is quite good.
I am also a small business owner, and my partners and I have already laid out a plan to adapt to the probable cost increases coming down the pipe...and it WILL involve firing some employees.
I'm tapped out, our first customer died.
There is a slight chance that a new product will get funding.
Our potential new customer base?
The third world.
Maybe we can make it up in volume. *sigh*
“Who is going to want to start a business and hire under such circumstances?”
Me. I saw my last business wiped out by 9/11. Bank made my loan paperwork disappear three days after the tower fell. I have been fighting my way back ever since working the worst job I ever had and saving up.
There is no quit in America. If you need to close one business, start another in a different way and drive on. It is either that or give up and join the parasites.
Me, I intend to fight.
Im surprised that this business didnt know about this law its been around for quite a while. http://www.doleta.gov/programs/factsht/warn.htm
IT STATES AT THE BEGINNING OF THE LAW:
“WARN offers protection to workers, their families and communities by requiring employers to provide notice 60 days in advance of covered plant closings and covered mass layoffs”
The only problem I see with this law is it is routinely being violated by employers big and small WITH LITTLE OR NO CONSEQUENCE.
What does mass layoffs mean ? How does one define “mass” ? 5%? 10% ?
If I planned to layoff 10% and did it gradually being laying off 1% this month, another 1% next and so on and so forth, does it qualify as “mass” ?
All I see are people suddenly being tapped on the shoulder and being asked to leave on the same day without the company being prosecuted at all.
No one, that’s who.
Take Republic Windows & Doors of Chicago, where being out of money and out of paying customers apparently does not give a business the right to shut down. Nor does it give that business’ bank the right to withhold credit. According to the unions, Jesse Jackson and the Governor of Illinois (yes, THAT governor), this company must continue to pay its employees salaries and benefits.
First, let me say, I own a small consulting business. I have two full time employees (not including myself) with about eight others part time. The part timers are easy—the full timers are more tricky as you’ve got to provide them benefits and have more obligations to them. I believe the issue with the Republic Windows (RW) workers, was benefits the workers had already earned (like vacation time) and things they were owed under a contractual agreement (like severance pay). When a business (any business) hires employees, they have an obligation to do proper accounting and make sure $$ is put a way to meet their obligations.
So, when a worker acrrues vacation, the business must put $$ away to cover it. If severance pay is owed, the business must put $$ away to cover it. An account can be created for these obligations and should be funded in case things go south. RW clearly did not do this, but it should have. And you should not touch that account, especially if things are going bad.
In short, it has nothing to do with the Government. It has everything to do with the Contract you make with your employees and honoring your word. Anyone remember honor?
So did Hank Reardon.
As to why they went fins up--looks to me like they expanded to meet the housing boom (that's a really nice warehouse, btw), and then the immediate collapse left them with a monthly overhead nut they couldn't meet. Not exactly their fault, but there were a few signs that their market (housing) was having a few problems.
I think Neil Boortz has the right idea on how to handle employees if you're the employer--employment agencies.