Among the issues most commonly discussed are individuality, the rights of the individual, the limits of legitimate government, morality, history, economics, government policy, science, business, education, health care, energy, and man-made global warming evaluations. My posts are aimed at thinking, intelligent individuals, whose comments are very welcome.

04 February 2009

What does a new job cost?

The Obama "stimulus" bill is to cost $825 billion and it is claimed, with little justification, that it will create or save 3 to 4 million jobs. One estimate is 3.7 million jobs, so let us use that estimate to figure the cost of these government "created" jobs. Few people realize that it will also destroy many jobs with future taxes and inflation. Few also understand that Obama's plans to keep our business taxes much higher than those of most other nations and to squeeze our use of energy to almost nothing, is already causing companies to lay employees off and not to hire new employees.

The cost per job created or saved in Obama's plan can be calculated to be $222,973. Some of these jobs, about 10% are said to be government jobs. This would be 370,000 jobs. These government jobs will not be self-supporting in the future, but will require on-going taxation to suport them at the cost of those of us who are in the private sector. The other 90% of the jobs, it is claimed, will be in the private sector.

The cost to create or save these jobs is amazing. Obama claims to be most interested in lower income people and their plight in a toughening job market. In the private sector, a professional position at a firm is commonly expected to add about 3 times the salary of the professional in income so that the firm can cover his salary, benefits, workman's compensation, payroll taxes, work space and tools, liability costs, added utilities, pro-rated advertising costs, and profit. Using this yardstick, the average salary for a year on the job "created" by Obama is $74,324. This is well above the salary of the average American worker. So, instead of creating jobs for the little guy, Obama would appear to be giving jobs to his political cronies and supporters as payoff for his election as President. Or, he is just a hugely inefficient job "creator." Likely, this is some combination of the two.

That 10% of the jobs in government should cost less in tools, liability costs, advertising, and profit. To be sure, these cost reductions are probably replaced handily by lower productivity, poorer management, and a general attitude of loathing for the taxpayer in the private sector, which causes many government workers to have little regard for frugality and the efficient use of resources. Many of these jobs will long be a heavy saddle on the backs of workers and employers in the private sector, not only levying higher taxes upon them, but also regulating them to death, and gobbling much of their time in added paperwork and government agency reporting chores.

Actually, the situation is even worse than this with respect to the government jobs. If we examine the breakdown of the spending more carefully, we find that $214.5 billion of the Obama bailout money is to go to state and local governments. According to Mark Zandi of Moody's economy.com, this will save or create 330,400 government jobs. That is an average cost of $649,213 per job. Apparently we should all decide to become teachers so we can partake of this massive payoff program for the support the teachers unions gave Obama! If we divide this cost by 3 we will have an annual salary of $216,404 for working 9 months of the year!

OK, I know that the average government worker or teacher is not going to be given a salary of $216,404 per year. But, why not if so much money is going to be given to local and state governments for only 330,400 jobs. Apparently, government waste is much greater than even you and I imagined! Perhaps this money will not be doled out as high salaries, but will be used to partially fund the unfunded pensions and retirement benefits which are going to balloon state and local government costs in many cases in the years ahead as Baby Boomers retire. This is payoff to the fastest growing unions in the United States, the government workers unions. Of course, we all also know that much of it will go to graft and waste.

What would it cost to create a normal private sector job in the U.S.? I could not find a good average cost, so I will start with what it would cost me and a new young scientist employee to create a new job in my materials analysis laboratory business. I can figure this several ways. First, I would have to add some laboratory equipment, about $75,000 worth. It would also require about $15,000 toward salary, payroll taxes, and benefits to supplement the training of the new scientist and the growth of our new areas of analytical services until more customers became aware of them and came a-calling. So, the cost figured this way is about $90,000. Or, I can create a job at a cost of about 2.25 times a salary of $40,000 a year, which is $90,000. This laboratory, as is the case with many very small businesses is a lean, mean fighting machine, so we can get along with a multiplier of only 2.25, or even 2.0 for the short haul of a recession, rather than the usual professional factor of 3.0. Figured this way, we borrow the money to buy the equipment and pay that off as we make money using the equipment to solve materials problems.

Of course, many other small businesses need much less expensive equipment, so many can undoubtedly create a job for less than we can in this laboratory. There are also many jobs which can be saved in the private sector with only a few thousand dollars of additional income for a company or a few thousand dollars of lower taxes. Clearly, the U.S. taxpayer would get much more bang for his buck if the stimulus program were aimed at small businesses. Of course, it is not surprising that it is not, because small businesses have no great lobbying clout and their owners are associated more commonly with the out-of-power party, which gave them little but more regulation after the early Bush tax cuts in the last administration. Howerve, no particular sector of the economy should be targeted by government as the winner.

The stimulus package that would work would be one of broad tax cuts for corporations, investors, personal income taxes, estates, and capital gains. Allowing corporations to bring back income earned in out-of-country operations without having to pay a 35% tax on it would also be very wise. A cessation of threats to put all of the 50% of our electric generating capacity based on coal out of business would also be very reassuring, as would be a general set-aside of all the efforts to mandate huge reductions in the use of energy, such as the 80% reduction Obama is advocating. Business has no future without energy, so why invest and create new jobs if our future is to shiver in caves until most of us are starved and frozen.

We also need a government which is willing to allow companies to have profits, which Obama has been arguing against in his sublime economic ignorance. We need to know that government will not be allowed to grow faster than the industry which supports it. With such knowledge and some willingness of government to get off our backs, we in the private sector will surge forward and produce all the productive, long-term jobs needed in America to continue the American Dream, which we created in the first place. With these conditions, our recovery from the recession will be quick and sure. With the Obama government spendthrift plan, uncertainty will reign in the business realm and investors will stay in their shells, which is exactly where they are now and for very good reason. Obama has a penchant for wasting the taxpayers resources and is madly displaying that penchant now.

Surely it is better to have the private sector create good, long-term, taxpaying jobs at a cost of less than $100,000 per job than to have government "create" them at costs upward of $223,000 per job. Only the most idiocentric ass (or donkey), more interested in creating an ever larger government and an ever smaller role for the rights and freedoms of the individual, will choose to make government the "creator" of jobs. Of course, the Messiah Obama is riding into town on just that ass.

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