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

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