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Mind Your Business: The Real Reason No One's Hiring


A disappointing jobs report released Friday has economists and pundits speculating about why so few jobs have been created in the last few months. Theories range from higher auto prices to low consumer confidence.

If you ask small business owners, I bet they'd have a different explanation. As the so-called "economic engine" of the U.S. economy, entrepreneurs have the power to create jobs and turn the economy around. So, why aren't they?

They've learned to be lean. The recession forced many businesses to go lean or go under. Business owners kept their best people, let the rest go and refrained from hiring new people. It also forced them to get efficient. By paying their best employees more to take on more responsibility and doing more themselves, business owners found that maybe they didn't need so many employees after all. Their resistance to hiring is a reflection of their desire to avoid making the same mistake they made during the last boom time – overstaffing themselves with anchors instead of sails. At least for now, they're going to stay lean.

Tax credits don't work. Tax credits for hiring or for offering health insurance sound good in theory. But, for companies with fewer than 10 employees – the majority of small businesses – those credits don't add up to much. If you're running a $1 million a year business with a profit margin of 2-3 percent ($20,000 to $30,000) in a good year, tax credits equaling a couple thousand dollars a year aren't going to make it worth hiring a new employee at $50,000 a year, plus health benefits.

Health insurance is too expensive. If health care reformworks out the way it's supposed to and insurance rates decline once the entire program kicks in, it may well turn out to have been a good idea. In the meantime, the cost of providing health insurance to a new employee is simply too high. And, since many employees consider employer-funded health insurance to be a right, they do not factor the cost – as much as $15,000 a year for a family – into their overall compensation package. Right or wrong, business owners see that they can hire three 25-hour a week part-time employees who don't require health insurance for the same price as one full timer with health insurance.

It's hard to fire people. One silver lining to the recession was that it let employers thin their ranks while citing the economy as the reason. While it was surely true for many, for others it was a chance to get rid of employees who just weren't pulling their weight. Fear of being sued for wrongful dismissal keeps many employers from firing employees who, while not doing anything particularly egregious, aren't exactly reaching for the gold ring, either. They're not eager to find themselves in that untenable position again.

Americans don't want to work.
Before you light your torches and gather on my front lawn, do a little research of your own. Find three small business owners and ask them – have you had trouble finding people who show up on time, work hard and don't spend half the day texting? I'd bet my last dollar that two out of three will tell you they have. We've become a nation of people with very high expectations. If the air-conditioning's not cool enough, the lunchroom not well-stocked or the benefits not fully subsidized, we're not happy. For small business owners, sometimes it's just easier to do it themselves than deal with employees who are constantly griping about their company's inadequacies.

We want it both ways.
No one wants to be just another cog in the wheel of corporate America. American workers want to be appreciated, valued and rewarded for their hard work. They want work-life balance, an opportunity for growth and they don't want to be asked to make coffee or empty the office trash bin. They also want the best salary, good benefits, a 401k and paid vacations. Unfortunately, you can't please all of the people all of the time. While big business can afford to offer fat compensation packages, it's not exactly known for recognizing individual needs or working around child care needs. And while a small employer might be able to give flex time or work to find a special niche for someone at their company, they are not as likely to be able have a profit sharing plan or offer an annual bonus.

My best guess is that the job situation will improve when everyone – the government, employers and employees – learn to give and take a little. Or, quite possibly, we've just witnessed what history will show to be a paradigm shift in hiring and employment practices.

Jeanette Mulvey is the managing editor of BusinessNewsDaily. She has written about small business for more than 20 years and formerly owned her own e-commerce business. Her column, Mind Your Business, appears on Mondays only on BusinessNewsDaily. You can follow her on Twitter at @jeanettebnd or contact her via e-mail at .

Jeanette Mulvey

Jeanette has been writing about business for more than 20 years. She has written about every kind of entrepreneur from hardware store owners to fashion designers. Previously she was a manager of internal communications for Home Depot. Her journalism career began in local newspapers. She has a degree in American Studies from Rutgers University. Follow her on Twitter @jeanettebnd.