Thursday, January 12, 2012

This helps explain the lack of jobs

It takes a Hungarian to help us understand why the U.S. economy is not creating enough jobs. Bottom line: taxes are too high, regulations are too onerous, you can't fire anyone, it's easy for employees to sue you, the law favors employees over employers, those who skirt the law have the advantage, the press vilifies success, and the tax code punishes success and rewards slackers.

Read this rant, translated decently from Hungarian. HT: John Cochrane, whose recently-started blog is off to a great start. Excerpt:

I could hire 12 people with €760 net salary, but I don't. I'll tell you why. You could work for my service provider company in a nice office. It's not telemarketing, it's not a scam. You would do serious work that requires high skills, 8 hours a day, weekdays only. I would employ you legally, I would pay your taxes and social security. I could give such a job to a dozen people, but I will not, and here I'll explain why.
I wouldn't hire a woman.
The reason is very simple: women give birth to children. I don't have the right to ask if she wanted to. If I had the right, and she answered, she could deliberately deceive me or she could change her mind.
Don't get me wrong, I don't have any problem with women giving birth to children. That's how I was born and that's how my child was born. I wouldn't hire a woman because when she gets pregnant, she goes for 3 years maternity leave, during which I can't fire her. If she wants two children, the vacation is 6 years long.
Of course, work has to be done, so I would have to hire somebody who works instead of her while she is whiling away her long holiday years. But not only couldn't I fire her while she's away, I couldn't fire her when she comes back either. So I would have to fire the one who's been working instead of her the whole time. When a woman comes back from maternity leave, I would be legally forced to increase her salary to the present level in her position. Also, I would be required to give out her normal vacation days, that she accumulated during her maternity leave. When she finally comes back to work, she would start with 2-4 months of fully paid vacation.


Ettaroo said...


you write a good blog and I enjoy most of your posts. But your opening line of "Bottom line: taxes are too high, regulations are too onerous, you can't fire anyone, it's easy for employees to sue you, the law favors employees over employers, those who skirt the law have the advantage, the press vilifies success, and the tax code punishes success and rewards slackers." sounds like something from a market fundamentalist credo. Taxes are much lower than they have been since the 1930's; we lost millions of jobs post Lehman from existing companies, so it is possible to fire people; if regulations are so onerous, why are profits derived from US sales (not just global sales) growing at a healthy clip; the press doesn't vilify success, they vilify everyone and everything in the Age of Cynicism!; the tax code rewards people who have the resources to hire great accountants with enough creativity and experience to find the loopholes that allow people like Buffet to pay a lower tax rate than their secretary and multinationals to use transfer pricing to reduce their tax rate to the low single digits. I don't expect to convince you of anything that I wrote and I believe everyone is entitled to their own opinion, whether I think is correct or false. But I think its fair to your readers to provide them with a more complete picture on these topics. I definitely do not have any answer or silver bullet to this employment malaise, but I do think the answer lies in slow growth over time and a re-orientation of our economy away from residential real estate, retail and finance, which were the major job growth areas in the 2000's. It will take time and any impetus to promote hiring outside of these sectors will be beneficial. But it has been well established by now that businesses aren't hiring because they are concerned about demand for their products and services - not the current or future level of taxes and regulations.

Scott Grannis said...

I'm here to tell you that taxes do indeed matter, and they matter a lot. When I was deciding whether to go into business after retiring, I quickly realized that the government would get almost 65 cents of every dollar of profit I made (federal income tax, state income tax, double social security tax, medicare tax). I decided instead to work for free, or not work at all. Every time I go to sell some stock, I think about the capital gains consequences. The stock market thinks about taxes all the time too. Higher deficits mean higher future tax burdens, and that reduces the present value of expected after-tax profits, which is the main driver of stock prices. Companies keep profits offshore to avoid onerous double taxation. The world is chock full of examples of how taxes influence and distort people's and business' behavior. Finally, don't believe the Buffett story, as he is completely misrepresenting things. Legions of analysts on the web can tell you how and why.

Benjamin Cole said...


So, your wife comes home in tears, from a good-paying job that helps with the mortgage or college for the kids. Her boss crudely told her to "put out or get out."

Milton Friedman says that government has no role in the above event. I reluctantly agree with Friedman.

But many would say there should be a regulation regarding the aforementioned event.

Often we do not dispute that some regs must apply. Obviously, you cannot murder your competition.

Often the highminded posturing just comes down to what type of regs you want, vs. the other guy.

So Scott, what say you to your wife in tears?

Scott Grannis said...

One very good way to promote growth, hiring, and new jobs is to not make it difficult to fire people. If you can't fire, you won't hire. Same with capital controls: the best way to keep money from fleeing your country is to put up no barriers to capital flows. I was fired once, and it was very painful, but in the end it was the best thing that could have happened because I ended up doing something better. A dynamic economy is the best way to ensure that those who are fired can get rehired.

Squire said...

Wrong Ettaroo, about hiring.

It is liberal/regressive progressive myth propaganda that companies don’t hold back hiring because of onerous social engineering and regulation. What companies do is not hire on the margin based on the risks of expanding. Companies find alternatives to hiring as hard as they can. With less risk and just simply hassle, companies would be less interested in alternatives such as permanent part-time, contractors, efficiency, technology, and off-shoring.

In the small business world, I know owners who will not expand even if they can because it isn’t worth the hassle of dealing with more employees, their lawyers, EEOC, increased visibility from the overlapping jurisdictions. In my final career senior management position we split up the company into three companies in order to stay below the threshold of many onerous regulations and social engineering requirements in California. My god, I dealt with human resources instead of operations every damn day. We ended up off-shoring more and more. We sold the company to foreigners.

This is the real world, not theory. Mangement people are well, people too. They never thought that their job was going to be the managers of social engineering policy. Nor become that enemy in the eyes of the powerful public sector.

Benjamin Cole said...

So Squire, what do you say to your wife who was fired after being told to "put out or get out." ?

William said...

All I can say is that I am 70 years old and income taxes including capital gains and dividend taxes have NEVER been lower in my lifetime.

I think "high taxes" are the least of our numerous problems. For example read this article at

"Ford Takes On Lockheed for $54B in Blast-Proof Military Vehicles"

Nothing like preparing for the last war - Siegfried Line style.

Bob said...

Wrong on so many counts Ettaroo.

"Taxes are much lower than they have been since the 1930's"
Yes and everytime taxes have been lowered we've had economic expansion. Taxes, as a whole, though are more onerous than in the past as there are many more taxes than in the past.

"we lost millions of jobs post Lehman from existing companies, so it is possible to fire people;"

The phrase "you can't fire anyone" is meant to represent the legal complications that arise when firing someone in todays litigious society. It is an obvious exaggerated statement to make a point. Get it?

"if regulations are so onerous, why are profits derived from US sales (not just global sales) growing at a healthy clip;"

Productivity. Just think how better profits would be if regulations weren't so onerous. Regulations are not a zero sum game. They are necessary, but should be thought of a stearing mechanisms to help the overall competitive environment for businesses, and not as roadblocks to enrich special interests, i.e unions, environmentalists bent on creating socialism, etc.

"the press doesn't vilify success, they vilify everyone and everything in the Age of Cynicism"

I agree we are in an age of cynicism but the press does vilify success. The current class warfare that the press constantly brings up is proof of this, i.e. 1% vs. 99%.

Scott Granis already addressed the Buffet comment. Do your homework. He pays himself through capital gains, not income and hence files a low tax return rate.

But I do agree with you that we must have an economy that is based less on inflated financial values and is more broad based.


Squire said...

Benjamin, when I was finally corralled by HR to attend a state mandated sexual harassment seminar being given at our company to all employees, I found out that as a manager I could be criminally held responsible for someone under my supervision who committed sexual harassment. That day the state became my enemy and has just educated the bum employees with a way to get me for them.

The sad thing is there were so many good employees at the company. Many employees didn’t want to be classified as non-exempt because they worked closely with management and wanted to do so. It was to their benefit. They learned by being close to the managers who worked long hours and had knowledge to give to those they supervised.

This isn’t a matter of having no laws, no regulation. It is the excess and onerous level it has become. The nanny state suffocates efficiency and innovation. It prevents advancement of the very people it purports to want to protect. This is the real world, not theory.

L.A. said...

Amen, Squire. Well said

L.A. said...
This comment has been removed by the author.
L.A. said...

"Bottom line: taxes are too high, regulations are too onerous,..."

I agree. I would just like to say that I have raised similar points on liberal blogs to no avail. They're convinced that taxes are low, that regulations are all good, that more regulations are even better, etc.

Liberals want a tight fitting bell curve of personal income. Most incomes centered around the mean, poverty elimination, all subsidized by the "rich" via excess taxation (one mechanism of increased taxation is regulations). Period. And oh by the way, that excess taxation won't dis-incentivize innovation, nor will it inhibit good innovative ideas from making it to the marketplace despite the increased costs (and less reward should one succeed) to do so.

As Squire correctly points out, we see the real world results of these types of ideas. We will soon find ourselves at a tipping point, if we're not already there, with regard to regulations, taxation, employment law, etc. I see similar frustrations in the manufacturing company I work for. And surprise, surprise...guess where we're investing...Not at home.

William said...

Squire said -

"I found out that as a manager I could be criminally held responsible for someone under my supervision who committed sexual harassment"

Having been ultimately responsible for 55 employees, I wouldn't take such a statement in a black and white a fashion. I am certain the law is very highly qualified when one gets into the details. You would have had to ignore an employee's complaint of harassment, been aware of sexual harassment and done nothing about it, etc, etc.

Try to put yourself in an harassed employee's moccasins and understand where the law is coming from. By the way, your state legislators passed the law that you are concerned about.

Colin said...

Anybody who thinks that the Hungarian entrepreneur's comments only apply to Hungary needs to think again. Consider these two stories just from today's NYT:

The government decides how much you can charge. And they want to decide how much you can pay your workers.

As an added bonus, check out what the DC government just did to a new service that started operating.

Scott Grannis said...

Colin: those are indeed very disturbing developments you cite. Any attempt to limit price increases will eventually result in shortages, rationing, and more expensive insurance costs. Higher minimum wages will only increase unemployment among those who most need a job. We need politicians who will campaign on a promise to do nothing.

John said...

"you can't fire anyone...? Are you serious? That's a job guaranteed for life. Where do you guys live?

ronrasch said...

Government employees have a very good chance of working for life with better benefits and retirement than equivalent private sector employees

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