Monday, July 8, 2019

Low Unemployment Brings A Big Negative To Businesses

Employers Pay Good Money For Bad Workers
Millions of people are back to work and economists agree that the economy is now at or close to full employment. How this impacts business and society is a double-edged sword. When economists talk about full employment, they don’t mean everybody has a job because not even the rosiest economic health can cut unemployment to zero. If unemployment falls too much, inflation will rise as employers push up wages as they compete to hire workers. To economists, full employment means that unemployment has fallen to the lowest possible level that won’t spark inflation. In the U.S., that was once thought to be a jobless rate of about 5 percent but has been lowered to around 4.5 percent. Today the LBS claims the unemployment rate is 3.7 percent.

In 1977 the American government added to the Federal Reserve the goal of creating "maximum employment." More important is creating what might be considered the "optimum" rate of employment. Most governments set themselves or their central banks a guideline of full or maximum employment but what exactly counts as full employment is up for debate. Central bankers continue to seek the "sweet spot" but in our fast-changing economy that remains a challenge. It must be noted the boundary between long-term structural unemployment and the temporary, cyclical kind is not clear-cut.

Non-productive Workers Often Nap At Work
While we are busy praising low unemployment numbers we should remember that with these comes a huge negative that directly impacts employers. Not only are they forced to pay higher wages but it is often for workers residing at, shall we say, the bottom of the barrel. These workers are often "brain dead" or carry so many bad habits that in many ways they are more trouble than they are worth. By this, I mean that they can actually cost an employer more to employ than they add to the company's bottom line. Poor quality employees actually cost companies money and often creates more problems than they solve. It is important to remember that simply raising the minimum wage without a corresponding rise in productivity does not work. 

Toxic Employees The Bane Of Small Business
From the employer's point of view, low unemployment makes running their business far more difficult in ways that most people never consider. Filling your ranks with lazy, stupid, or incompetent employees creates a slew of costly management headaches. This is exacerbated if these people are required to work off site outside a controlled environment. Is such a situation people are often called upon to make judgment calls or decisions that can quickly come back to haunt them and the company is the one responsible for their actions. Toxic employees are the bane of small business.

Make no mistake, the brunt of the damage being done as a result of this low unemployment era is falling directly upon the shoulders of small business and retailers. Not only are desperate employers having to pay more for less, at times they cannot even fill job slots. this often means at times they are being forced to cut hours. While it is generally the marginal hours where the fewest customers visit it still has a long-term effect because when customers find a store closed they often break their buying habits and seek out other alternatives. Another factor hacking away at the bottom line of employers is that as soon as they have spent money training a new employee that person is pouched by a bigger company offering better pay and benefits. This adds to the "turnover factor." When jobs are plentiful employees are quicker to explore other job options and turnover becomes a costly problem.

In the middle of 2017. President Trump attacked Amazon saying, the e-commerce giant is "doing great damage to tax-paying retailers" but has failed to follow through with any move to level the playing field. Ironically this was and remains at a time when Amazon with the aid of government is eating the lunch of brick and mortar stores. Still, Washington takes no action to recognize that e-commerce is a different kind of animal and that it has the potential to harm the economy. Understanding the value of brick and mortar stores to local communities India has placed several restrictions on E-retailers in order to level the playing field and make things fair.

Recently Amazon has been under a great deal of criticism for low pay and the harsh treatment of its workers so it should not come as a surprise that Bezos a proven master of hype and re-framing issues has announced his company will be increasing wages. Amazon said it will start lobbying for an increase in the federal minimum wage, currently at $7.25 an hour. The fact is most employees already are paid far more than this. Do not be fooled, this is just another ploy as Bezos pursues his goal to eliminate competition all over America. By raising the cost for smaller competitors he will put them out of business." It is little wonder he is now endorsing this as he eliminates workers and moves towards automation and utilizing more robots.

By far the worst abuser of the current e-commerce system here in America is Amazon which has developed strong ties with the government. Adding to the pain is the fact the United States Postal Service has decided to shower Amazon with special benefits. Not only do they give the company special rates but also have gone to delivering Amazon packages on Sunday. To make matters worse state and local governments have put special packages together with incentives and tax breaks aimed at luring Amazon to build in their areas oblivious to the damage it will cause in coming years. How can other retailers compete with that!

The truth is those small business owners often tied to brick and mortar are forced to wear many hats and their workers are often required to perform several different and distinct tasks. This often means large companies are better candidates for utilizing robots and automation as a way to reduce labor cost. This means a company such as Amazon gains a huge advantage over small and local businesses as wages rise during low unemployment. This helps explain why its CEO Jeff Bezos recently endorsed the idea of a higher minimum wage. For Bezos, this is a bonus in that it will help eliminate competition all across America as he doubles down on adding more robots to his workforce.

3 comments:

  1. Low unemployment and yet the people I know who don't work still are equal to or greater than those who do AND on every street I drive along there's a "store closing" sing out front at least 1-2 businesses. I recently went to a guilty pleasure and had sushi at a place I've not been to for some time......it was the only business still left in this tiny strip mall.......5 other business are long gone.

    something isn't adding up in the "economy" if you ask me.

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  2. As a current job seeker, older but with tons of skills I'm not buying the low unemployment numbers. I see literally thousands of people applying for the same jobs I apply for. When one gets several 1,000 people to choose from for a basic low level middle class $50 k a year job I do not consider this a worker shortage. Luckily I have friends who are paying me to help renovate their apt building. I'm not considered unemployed

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  3. "Low unemployment" is a FRAUD ...the real number is closer to 20 - 23 % and anecdotally I know this is true based on watching my highly experienced STEM colleagues literally SCRAMBLING to find work these days. On average one in four in my circle is UNEMPLOYED... Employers LOVE high unemployment as it keeps a firm jackboot on the work force and allow absurdly low wages to be offered. Shadowstats.com has done much to expose the US Gov fraud also.

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