How Much Does It Cost To Pay Employees?
With all of the federal programs in place to stimulate hiring, it is baffling that the unemployment rate is so stagnant. A recent CNN Money story sheds light on the tough situation that employers are facing. Basically, employers do not see hiring a single $14/hour employee as just taking on the obligation to pay the employee that rate. Instead, other factors such as tax treatment and insurance jack the price up to around $20/hour. To top it off, the new employee is not nearly as useful during the first few weeks since he is being trained.
Employers must, therefore, make a huge initial investment in the new employee which will only pay off if the employee remains with the company long term and does good work. Otherwise, the employer has lost out on this initial investment in human capital and must begin again, already in the red. Clearly, it is a difficult decision. Though President Obama has tried to create different federal incentives to push employers into making this investment, Congress has derailed many of them. Eventually, when business picks up, employers will feel safe in taking on new employees. But this begs the question: Will business pick up if employment is still in a slump or do people need work in order to drive business?