Monday, August 09, 2010

While there certainly are a lot of taxes incurred in hiring someone (or, for that matter, keeping them on the payroll), that isn't the real and complete reason this (or any) employer isn't hiring.

It wouldn't matter how high taxes were... if the employer thought he would generate more revenue than what it would cost him in the combination of salary, taxes and benefits, then he would be hiring.

And it wouldn't matter how low taxes were... if the employer doesn't think he would generate more in additional revenue than the costs, then he wouldn't be hiring.

True, it takes more in additional revenue to cover higher costs, so it is possible that the employer figures adding an additional employee could generate higher revenue, but not enough to cover the full cost... but somehow I figure the employer isn't breaking down his analysis to that extent.

He probably doesn't feel that confident that adding an additional employee would generate ANY marginal revenues, let alone enough to cover whatever level of taxes incurred in hiring new employees.

And, play the broken record please, why does he feel that way? Because he doesn't have much faith that his customers are going to be spending anything more than they've been spending. And while he might think he could steal some sales from his competition, he realizes that would likely just offset the sales he is going to lose from existing customers who go out of business or for some other reason cut back on their spending.

Given his lack of confidence, it is logical that he isn't going to do anything to add to his expenses. It makes no sense to add payroll costs if you don't think the revenue increase is going to be there. In other words, it ain't the taxes that is stifling hiring, it's the lack of confidence.