Skip to comments.Why Small Business Isn't Hiring And Won't Be Hiring
Posted on 02/08/2011 12:30:31 PM PST by RobertClark
Pundits and politicos promote a magical myth: a coming small business hiring boom. That fantasy is completely disconnected from the harsh realities of private enterprise.
Regardless of their ideological persuasion, pundits and politicos reliably repeat the mantra that "small business is the engine of jobs growth." The mantra is followed by the pundit-politico's belief that a "small business jobs boom is right around the corner."
I have news for the pundits and politicos: ain't gonna happen. Why? The answer cannot be found in the manipulated and massaged Bureau of Labor Statistics numbers (have any real jobs been created, net of jobs lost, in the past year? Who knows?) or in the punditry's Cargo-Cult-like belief in a mythical "small business jobs machine" that they have never experienced and know nothing about.
While a handful of the new crop of politicos are entrepreneurs, most Washington denizens are attorneys, the offspring of wealthy or politically connected families or people who have lived off the government at some level their entire lives. Most have never had a customer or client or had to borrow off a credit card to make payroll. (I have; any pundits who can honestly raise their hands for that one?)
Pundits come in two flavors: the academics, happily making mud pies in the moat surrounding their secure Ivory Tower, and the loud-mouths who have screeched louder and longer than the other media-monkeys. All know less than zero about actual small business.
To understand why small business isn't hiring and won't be hiring, you need to understand the psychology of this era and the systemic pressures on all small businesses which don't live off Federal government contracts. In a very powerful sense, those businesses which live from one government contract to the next are not private businesses at all: they are merely proxies or extensions of the government. Their non-governmental work is either trivial or non-existent.
So when some government set-aside program sanctions $40 million or whatever for "small business," it's no different than opening another government office: the only difference is the employees are not Civil Service. The competition is not between private-sector and government, it's only between rival government contractors.
What pundits and politicos don't get is small business knows the "recovery" is totally bogus. Why hire somebody who you'll have to lay off a few months from now? Laying people off is emotionally painful--you dread it, tire of it, are wearied by it. This is a real human being who is losing their job, not some ginned-up statistic hyped by some think-tank-pundit pulling down $15K a month for dishing whatever flavor of propaganda he/she is paid to churn out.
The Washington establishment--the Fed, the Treasury, Congress, the Obama Administration-- seem to believe they've successfully pulled the propaganda wool over Americans' eyes, and that the yokels actually believe "things are getting better and better every day and in every way."
Only the yokels without clients, customers and payrolls can believe the propaganda.
Meanwhile, back in the real world, small business income is down 5%. Small Business: Still Waiting for Recovery.
According to data from the Bureau of Economic Analysis. Proprietors' income-- the profits of unincorporated businesses such as partnerships or individuals who work for themselves--is down nearly 5 percent from two years ago, while corporate profits have jumped 21 percent in that period.
About 19.9 million partnerships and sole proprietorships with no employees existed in 2008, the latest year for which U.S. Census Bureau data are available. That number fell almost 2 percent from the previous year.
In a private-sector workforce of about 106 million, that's about 19% of all people with a job. Recall that the BLS counts you as employed if you work one hour a week or if you're "self-employed," even if you aren't making a dime.
Only in the Fantasyland of propaganda does nobody notice that self-employed people who are seeing revenues and profits fall do not need to hire someone: they're sinking all on their own.
Only in the Fantasyland of propaganda does nobody seem to notice that for every celebrity-chef restaurant opening to gushing hype in Manahattan, West L.A. or San Francisco, two other restaurants quietly closed.
Small business understands uncertainty is now permanent. That's why 26% of all new private-sector hires are temporary--and if we subtract the bogus phantom jobs created by the BLS "birth-death model," then the number is probably more like a third or even half.
Small business understands that the "recovery" is merely a Federal towel stuffed in the gaping hole in the rowboat's leaky planks, and that it's literally insane to hire workers when your revenues could evaporate next month.
Small business re-discovered it could do more with less. Once businesses trimmed payrolls to survive, they discovered they could make more money for themselves and do so with fewer people. Why add to staff when all that means is transferring your own paycheck to someone else?
Small businesses are closing, not opening. Rents have barely dipped, local government taxes and junk fees have skyrocketed, and the complexities and costs of the new healthcare bill have all added systemic pressures on every small business: it's either adapt quickly and successfully or perish, and many are choosing to close down and quit working so hard for so little payoff.
The programmers are independent contractors who have to take care of their own healthcare and taxes, or they're young and single so the healthcare insurance costs are modest--if they even bother with buying insurance.
Nobody's hiring for the long-term for the simple reason that there is no long-term: we're either selling the company as soon as we can, or we're waiting for the next dip in revenues to close down before we lose everything.
Local government has grown accustomed to small business being uncomplaining tax-donkeys, silently paying every junk fee and every additional tax the government levies. Only a funny thing happened on the way to local government's plan to fill the shortfalls in its own revenues by taxing small businesses even more: they're closing down.
The reason is simple: why work for free? This is incomprehensible to both local governments, who expect all those "filthy-rich small-business Capitalists" to pay higher taxes and fees, and the safely remote-from-the-real-world pundits and politicos.
These members of the academia-think-tank-media-politico Cargo Cult have a magical belief in a mythical "small business" which is anxious to get out there and create new jobs because "to get rich is glorious," as if "getting rich" is even an option for 90% of real small businesses.
In the real world, small businesses aren't getting rich, they're going broke and closing down to save whatever remains of their sanity and assets. You want high-tech and "clean energy" jobs? Well, how about MySpace laying off half its 1,000-person staff? How about Evergreen Solar closing its Devens, MA plant, laying off 800 workers and moving production to China? Did the pundits honestly think that globalization was over?
Memo to pundits and politicos: you worship at the altar of Capitalist profits driving small business--get real. People will do whatever they have to in order not to go broke.
That's why the three guys or gals aren't renting an office--who needs the overhead? They also don't have health insurance: who can afford $1,000 a month for crappy, confusing "care" young people rarely even need? Better to pay cash.
And they aren't hiring "employees": they're paying their friends with equity shares, or cash, and paying their own taxes is up to each free-lancer.
That is the new model of American entrepreneurship: no office, no overhead, no employees, no health insurance, no business travel. That's the only way any new enterprise can survive.
Everyone who buys into the myth and pays absurdly high rents, junk fees and healthcare insurance will be ground down and bled dry. The only exception are those well-connected enough to run a pipe into the limitless lake of Federal money. Yes, 40% of the lake is borrowed from our kids, but no matter--the "recovery" is real, and this stone with a crudely painted radio dial is in fact a working radio. It's magic. You just have to believe.
Small business can't afford to believe in myths and fantasies. They are dealing with the harsh reality of adapt or die.
Obama chastises the Chamer of Commerce, telling them “business had better start hiring.”
Chamber of Commerce to 0bama -
yep, we will, as soon as you and your ilk are out of office.
The idiot has never even run a lemonaide stand. He knows ZERO about business.
Lecturing the Chamber of Commerce won't creat any jobs. And neither will Zero's 1970's era policies.
This is a very good article.
I have a friend who owns a Sewing machine store. The top model sells for $10,000 dollars, even the mid priced model is $5,000, People can buy a lot of clothes for $5,000 dollars.
Another friend is in the truck repair business. When no one is building , no one is getting their truck fixed.
A friend in the florist business. Flowers cannot be eaten, unless somone dies no sales of flowers.
I can go on , I have a lot of friends.
Small Business will not be hiring, until people start spending.
No jobs, High priced Fuel, increased property taxes,High cost of food, Health Insurance rates rising, (Mine went up $35 a month) the High cost of heating homes in a really cold winter,almost no interest on savings,Fear of infation,(Government caused inflation) fear of losing pensions, Social Security frozen.
Many people have nothing to spend and others are afraid to spend.
Not happy at placing this generation in the toilet , the government has pledged out Grandchildrens future.
But Obama keeps flying and Golfing and playing B-ball, and having White Parties and ignores the trials of those middle class people he promised not to screw over.
Obama doesnt seem to understand that People go into business to make money, and not to create jobs for non-relatives.. Businesses create jobs because they are necessary for businesses to prosper.
Some businesses would sell you poison if they could make a profit. When times get tough all competitive businesses will try to get along with as few employees as possible, pay as little as possible and keep benefits as low as possible. That is the nature of Capitalism. Another nature of Capitalism is you dont get jobs from poor people, you need business to create jobs. You should be encouraging business growth. - tom
Watch this video and see Obamas socialist/communistic attitude toward businesses.- tom
A recession is when your neighbor loses their job.
A depression is when you lose yours.
Recovery starts when ObaMao loses his.
Why THIS small businessman is not hiring:
Get your hand out of my pocket, Kenyan.
Pretty darn close to the mark. I heard myself several times as I read. Good article, it will get no attention.
For small business no attempt to do right is not punished by regulation. All the way from increased unemployment taxes, visits by OSHA over nothing, a new form to fill out or something new to keep up with for THE MAN. If they ever get their hooks into you all you will do most days is feed THE MAN.
An office front is just an invitation for someone you don’t want / need to see to know who you are and where you are.
Hiring people is a burden that only carries a punishment if you are not able to hire contractors. You only hire if you have to. Otherwise, you and your co-workers try to fly as low under the radar as you can.
Government needs to evaluate what is required not what is wanted. However, government does not have the experience or objectivity to understand the difference between a want and a need. To do so might mean there needs to be fewer of them and that their phony baloney cushy job would disappear.
And now this can you imagine how this will hurt small business?
Obama Budget Proposes Broader Unemployment Taxes
This article could have been written about my family. Husband is a software contractor, we don’t have health insurance because we can’t afford the 1500$ a month for two adults and 3 kids. We pay all our own taxes, and we are getting crennelled in 2010, or so says our accountant. We are still waiting for the final tax tables to come in.
My brother just closed down his software consulting company. I tried to tell him back in 08 that Obama was NOT the dude to be voting for, so I suppose he got what he voted for. Its a shame though, the guy has 5 kids, no business, and no job. SCARY TIMES.
Things are getting WORSE not better.
I would take issue with only one thing:
Zer0 and the Rats are intentionlly forcing small business to close by making the business climate far more difficult for small business people with increased fees and taxes, attempts to mandate health insurance coveage for employees, onerous new regulation, and heavy-handed, punitive monetary enforcement of regulations.
The Marxist Rats don’t like the bourgeoisie. You can see that in Zer0’s condescending and accusatory remarks about businesses not hiring. The bourgeoisie thinks independently and is deemed the enemy for abusing their allies: the proletariat (labor)
And yet some businesses prosper. I have friends with a boutique software company who are building another new building and adding people. I really don’t understand though how they can tolerate so many employees instead of consultants.
Some of us have been consulting for years and years now and can’t do much else. Going back to being an employee of a machine is just too painful. Health insurance is the biggest risk to me. The older you get the worse the risk and greater the unease and the cost just zooms upward. I don’t see how we will be able to afford it when we most need it.
As a small business owner, the article is spot on.
We’ll have a recovery when Obama leaves office, presuming he is replaced by someone who believes in capitalism.
The economy actually began to crater when it became clear Obama would be the Dem nominee. The productive class (investors and business owners) went Galt.
There will be no improvement until the Kenyan and the Liberals in Washington are gone. It would also help immensely if about 90% of the government was axed permanently and 98% of it's pernicious regulations were revoked.
If anybody wants to know where the road we are currently on leads to, take a ride to Detroit.
The wise man prepares for a the disaster seen on the horizon.
The ‘makers’ know when it is time to hunker down and wait for the disaster to pass.
Anyone involved in markets knew what Obama meant to do thanks to Joe the Plumber. It’s just a matter of waiting for him and his mirmadons to be proven wrong again.
I hear that, I am still paying off an ER visit for my daughter when we thought she broke her arm. She was fine, but I was out almost 2000 for a 30 min visit and 2 xrays. It was late on a Sunday afternoon. Sigh.
pithy article, thanks for posting
Hubby’s pension check got hit by $300+ in more taxes for 2011, $120 last year. NO COLA’s for SS which means cheaper type foods, less gas, and we sure aren’t going to be buying a new car lots of clothing or gadgets.
Bad example. They received $58M in state aid (taxpayer money) from Massachusetts to open a factory in 2008.
Maybe you should paint yourself and her brown and not speak English. Seem to work pretty well for lots of people.
I am gonna assume youa re being sarcastic.
But in all honesty, I pay my bills, I am willing to bet that a lot of the illegal immigrants in my hometown do not pay their medical bills. They know they don’t have to (I live in a rural area, we get a lot of illegals here due to the agri-businesses and farms).
I am indeed but what you say is true. The fact is that you are better off to be indigent or illegal in this country than you are to be without insurance if you are in need of medical care.
The medicos can’t turn them away and they know they can’t get blood from a turnip so the soak you and me.
The ambulance chasing lawyers make sure they know their “rights” and that a sympathetic jury can be found so the hospital can’t do anything short of providing them the best available.
I understand your plight, but I do not believe the politicians do. They appear to believe they can squeeze more and more out of people who are already being squeezed.
Government is a cancer that won’t stop growing. It will take a massive failure of the economy or an enthusiastic electorate to slow govt growth. The ‘private sector’ is that which doesn’t consuming tax dollars with impunity. There are no checks or balances on government growth. Five or ten years of republican led congress didn’t help in the 1990’s and won’t make a difference now. Duck and cover.
This is the best article I have ead in a long time. as a small busines person myself - its SPOT ON!
This is why I hope for a massve collapse so we can get ri of 50% of govt leeches.
......Small business re-discovered it could do more with less......
This is the money quote. The statement applies across the board to both small and large business. New hires are detrimental and perhaps even mortal
The unnecessary and those who were dead wood have been purged.
Sure they do, they don’t care. Which is why we are now using coupons like mad, buying expensive products whenever we find them on sale with those coupons, we have stopped eating out except for birthday’s and anniversary, then we split rack of ribs.
Started buying what clothing we need from the Salvation Army and doing with out what were little luxuries we once didn’t think twice about buying.
Hubby is back at 70 to doing home repairs we once would have hired done. Scares the living daylights out of me seeing him climb up on the roof at his age.
True, and there is another dimension to this that never gets discussed: thanks to 40 years of deliberate dumbing down of public schools. the average American worker is now functionally unemployable. Even where there is a little talent, the overweening sense of entitlement that so frequently goes along with it is intolerable to most small business owners - who would rather just work longer hours and do the job themselves.