Wednesday, September 21, 2011

Making Not Working Pay

A little over a month  ago, the regional director of the SBA called for a roundtable discussion with the El Paso Hispanic Chamber of Commerce and area businesses.  In my current role as chairperson, I attended.  We were told that The White House was asking for this meeting in order to get feedback from the local business community about their needs.

As the round table discussion started, I saw that the room contained a good representation of local businesses, many of whom contract to perform various services for the federal government.  We also had a local city councilwoman in attendance to represent the city of El Paso.

The SBA director kicked off the discussion by getting some feedback on how waiting times at the international bridges were affecting local businesses. (Since many businesses here do business on both sides of the border, excessive waiting times are always and issue.)  Then she came to what appeared to be the real theme of her visit, "Tell me how immigration policies  and problems with immigration are affecting your businesses."

The business owners at the table, who were predominately Hispanic, sat quietly without commenting.  The regional director prodded us. "Let me tell you how this works. Everyone will speak.  The President really wants to know how we can help your businesses. You can speak now or I can call on you.  Now tell me how you are being impacted by immigration."

One of the participants spoke up.  "I do have an issue, but it's not really about immigration."  She nodded at him to continue.  This man owns a landscaping business and has a contract to perform services for the federal government.  As part of his contract, when the government agency contacts him to perform landscaping services, he has about a week to get a crew together to do the job.  His issue:  the trained workers he has relied on to do the landscaping work will not take the jobs because they are collecting unemployment and don't see the need to go to work as long as they have their unemployment checks.

Immediately, it was as though a flood gate had opened.  One after the other, business owners around the table began to echo this problem.  They can't get workers to take the jobs that are available; people coming in for interviews are coming in only to satisfy the conditions of continuing to draw their unemployment.  What the business people at the table most wanted the SBA to know is that extending unemployment indefinitely keeps people from taking jobs that they could take and would take if they were not drawing unemployment.

The councilwoman now spoke up.  She explained that it is not that the unemployed don't want to take these jobs--they can't afford to.  She cited the case of a man in her district who is making $10.00 an hour on unemployment with no federal withholding.  He cannot afford to take a job paying $7.00 an hour with withholding. If the landscaper wants to woo workers who are currently drawing unemployment, he needs to raise the wages he is paying enough that his workers are taking home $10.00 after taxes.  Then, workers will be interested.  The landscaper replied that he cannot afford to pay that much for workers.

This impromptu discussion about unemployment and the administration's policies towards unemployment highlighted the huge disconnect between the federal government and the business community, and it is particularly relevant in light of the provisions of the American Jobs Act, proposed by the president.  The American Jobs Act seeks to extend unemployment benefits for an additional year (though not longer than 99 weeks) and to make discrimination against the long term unemployed illegal.  An unemployed person who interviews for a job could sue for discrimination and file a complaint with EEOC if he does not get hired.  But the bill overlooks the realities that the dynamic of unemployment benefits creates for both workers and business owners.

I experienced this personally 14 years ago when I worked briefly for a national employment agency before starting my own business. Unemployment has always been about 2% higher in El Paso than in the rest of the nation, so we saw a great many unemployed people come through our doors.  And since we offered temporary jobs as well as permanent jobs, I worked with many repeat employees.

The common theme among the temporaries was that as long as they were receiving their unemployment checks, they could be more selective about where they worked.  So while I had certain candidates who called me every day asking for work, when I would find a position for them they typically found some sort of a problem with the position that made it unacceptable.  The location was too far away--"I'm not going to use up my gas and wear out my tires going all the way out there;"  the supervisor was unpleasant, or "My uenemployment benefits are more than that job pays."  I often tried to explain that while the unemployment benefits might indeed be initially higher than the pay, unemployment ends.  A job might lead to wage increases, promotions, or an opportunity for a better job.  Unemployment insurance leads to none of these.  But most of the people I met had their minds made up--they were not going to work for less money than they could get for staying home.  As they declined work, their skills grew more outdated, and their job prospects continued to drop. What seemed to be a good short term decision to turn down work turned into a cycle that made it hard for these people to go back to work when they finally had to do so.

Over the weekend I was reminded of one of Obama's first stimulus programs, Making Work Pay.  Making Work Pay is a tax credit that was built into the American Recovery and Reinvestment Act of 2009, which entitles eligible Americans to a tax refund.  What struck me over the weekend was how ludicrous the name of this program really is.  After all, making work pay is a function of a free market system.  Making work pay is what every entrepreneur with any sort of a skill does when he or she decides to take that skill and invest his or her time, money and lifeblood in a business.  Making Work Pay is the motivation behind business ownership, business growth, and business success.  Every profitable business starts when someone looks in the mirror and says, "This is what I know how to do.  How can I get paid more do it?"  It is not a function of any government and certainly not one that is as anti-business as this one.

This distinction is especially important as we are looking at Stimulus 2--The American Jobs Act.  The American Jobs Act promises to help both small businesses and the unemployed.  But in reality, it just creates more incentives and more penalties.  How many small businesses want to risk a run-in with the EEOC or a possible lawsuit by interviewing an unemployed person who may not get the job?  It is easier just to never call those candidates in at all.  How many unemployed people who are netting $10.00 an hour for 99 weeks want to get up early and work all day in the sun doing landscaping for $7.00 before taxes?  Probably not many.  No matter how many jobs are available, if the private employers cannot compete with the unemployment benefits, they are not going to find willing workers. 

Mike Rowe (of Dirty Jobs fame) was on Fox and Friends yesterday morning talking about vocational training. According to Rowe there are over 740,000 jobs currently available in construction and manufacturing which cannot be filled because workers do not have the necessary skills to do these jobs.  His point was that we need to close the skills gap in America by redefining what we consider to be a good job.  While I have no way to verify Rowe's figures, I do wonder how many of those jobs might be filled by a person currently on unemployment if he or she were not incentivized not to work?

To bring back American jobs, we need an environment that is friendly to business rather than contentious.  And we need to reward work and initiative rather than choosing as a society to make not working pay.

Alexandra Swann is a small business owner and the author of No Regrets: How Homeschooling Earned me a Master's Degree at Age Sixteen. For more information, visit her website at

Friday, September 9, 2011

The New Normal

Last night President Obama gave his jobs speech on behalf of his American Jobs Act, which is basically a larger version of the American Recovery Act.  Amazingly, the White House is proposing the same basic ideas they have been working on for three years--payroll tax breaks for businesses that hire new employees, more unemployment benefits, and more government spending for "shovel ready jobs."  We are told that creating jobs has to be the primary goal of our government and that no issue is more important.

But behind the scenes, if you look and listen very closely, you can hear a different message coming from the media and the ideologues who support the White House.  This message is more subtle but very pervasive, and I believe that this is going to be the real campaign message of the Obama Administration in 2012.  Put simply, this message is as follows:  The recession is permanent.  Housing is going to stay depressed.  Business is going to stay depressed. Unemployment is going to stay high.  Nothing is going to get better--ever.

We are beginning to hear the words "permanent recession" as part of the media's vocabulary.  Take for instance a Washington Post article published on August 31 and reprinted in several publications since that time.  It tells the story of house painter German Morales whose business has been all but shut down by the housing crisis and the economic troubles plaguing the country.  Post reporter Michael Williamson tells us that Morales registered his painting company in December of 2007.  As the recession deepened, he lost his home to foreclosure but he kept busy during 2008 and 2009 doing whatever work came his way.  "But lately," Williamson writes of Morales, "his job has been defined by what he can't fix, the mess he thinks is well beyond fixing....last month, when stock prices tanked and sales of new homes fell for the third straight month, Morales sat down with his wife and two sons to discuss their finances. 'I'm sorry,' he told them, 'but this is the way it is going to be--job to job, week to week. It's not getting  better.'  He is one of the millions for whom the recession has become permanent, no longer a crisis to endure so much as a reality to accept."

Wow!  What a concept.  The recession is a reality to accept rather than a problem that needs fixing.  Williamson's article details the devastating consequences of the housing meltdown to Morales and his family, but nowhere in his article does he mention the cause of the drop off in new home sales--increasingly tightening regulations which make it virtually impossible for many Americans to qualify to purchase homes.  As guidelines continue to tighten, of course, sales are going to continue to drop off and values are going to continue to plummet.

I see this new approach to the economy in the media and in the comments of people who post on this blog. So many of the comments that I received on Suze Orman and strategic default chastise me for encouraging people to stay in their homes and make the payments if they can afford to do so. Overwhelmingly, readers who comment make the argument that housing will never recover.  The economy will never get better. Homeowners have no choice but to walk away from their homes because housing in America will never again increase in value.

I find it amazing and ironic that the Administration that sold this country on hope and change is now delivering a new message, "The situation is hopeless; nothing is ever going to change.  Get used to it."

Unfortunately, this new message of hopelessness will probably have almost as much appeal as the original hope and change message had.  Hopelessness takes away personal responsibility.  If a mess is so big that it cannot be fixed, than I as an individual have no responsibility to attempt to make anything better in my own little corner of the world. I am a victim of a system that is bigger than I am.  I have been swallowed up and destroyed by forces I cannot control.  I cannot make anything better; therefore, I don't even need to try.

People who embrace the "it's hopeless" approach to the recession are partially right--by embracing hopelessness and fatalism they are sentencing themselves to a lifetime of financial problems.  As people succumb to hopelessness, they lose the will to seek out better options with better outcomes.

The truth is that our economy is being held captive by ridiculous regulations which are binding business, lending, and growth.  If we don't get rid of the root cause of the current housing crisis--absurd regulations and guidelines which have been implemented over the last three years--the housing sector will not improve.  If we sue the banks into bankruptcy, as Maxine Waters seems to favor, lending will dry up completely which means that we will have no capital for growth or expansion.  If we allow the EPA to continue to regulate us until middle class Americans can scarcely afford light bulbs, we are literally turning out the lights on the free- est, most enterprising society which has ever existed.

If Obama were serious about economic recovery and job creation, he would take out a pen and start repealing repressive regulations today, and we would see major improvement before the next election. But, instead, he has assured us that the regulation is here to stay.  And as long as he has business and entrepreneurship bound and gagged in a corner, our economy is not going to rebound.

Personally, I believe that life is about choices and that our outcomes are determined by the choices we make, both individually and corporately.  I was very inspired by Governor Rick Perry's speech when he announced his candidacy for President last month:

It’s time for America to believe again. It’s time to believe that the promise of our future is far greater than even our best days behind us. It’s time to believe again in the potential of private enterprise, set free from the shackles of overbearing federal government. And it’s time to truly restore our standing in the world, and renew our faith in freedom as the best hope for peace in this world that’s beset with strife.
The change we seek will never emanate out of Washington, D.C. It will come from the windswept prairies of Middle America, the farms and factories across this great land, from the hearts and minds of the goodhearted Americans who will accept not a future that is less than our past, patriots – patriots who will not be consigned to a fate of less freedom in exchange for more government. 
We do not have to accept our current circumstances. We will change them. We are Americans. That’s what we do. We roll up our sleeves. We go to work. We fix things.

 What we as Americans choose to believe over the next fourteen months is going to determine our futures, not only for the next four years but for many decades beyond.  I choose to believe that real hope for this country begins when we change the occupants of 1600 Pennsylvania Avenue and bring in a President who will stand for individual freedom and opportunity and limited government.  When we have a man in place who believes whole heartedly in these principles, we can begin to rebuild our economy one business and one job at a time.
For more by Alexandra Swann, visit her website at