The Cost Of Labor

How much does it cost to hire someone?  Or, better asked is this:

What has to be true in order to hire someone?

For many who champion “worker’s rights” the lesson is becoming crystal clear.

The one and only test an employer needs to apply is this:

Does the potential employee cost more to employ than I can expect to gain in production?

If that answer is “yes”, then the employer forgoes the hire and continues on without hiring anyone.  On the other hand, if the employer CAN obtain more production than the employee costs, the decision will be made to hire that person.

In certain places, the government has stepped in a changed the cost of hiring.  Normally we think of the give and take to occur at the wage level.  That is, how much is one person willing to work for another?  However, when one group of people feel that they need to “protect” another group, bad things can happen.

For example, a group of people may decide that mandating sick days is a “good thing”.  However, what that does is raise the total cost of employment.  Then, that group of people mandates a minimum wage.  Again, raising the cost of employment.  Then unemployment insurance, FICA, retirement and finally health care.  ALL these things cost money to the employer when trying to  hire an employee.

The result?

Those higher costs prevent employers from hiring.  And real life proof?

San Francisco, facing a looming $306 million budget deficit, is willing to pay private companies to hire people off the city’s welfare rolls.

On Monday, the city doubled its subsidy to $5,000 per employee because so few companies were taking advantage of the current local economic stimulus program.

What does this mean?  It means that hiring an employee is more expensive than $2,500 in the city of San Francisco.  We’ll see if it’s more expensive than $5,000.

Maybe one of the reasons?

A Board of Supervisors committee is expected to recommend approval of our proposal to suspend the city’s payroll tax for up to six years on new jobs created in these areas, and the full board could vote on the measure as early as Tuesday.

Is it little wonder that San Francisco is finding it hard to find jobs for her citizens?

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