“Blame me for the job losses”:
I caused part of this job loss and I know precisely why; the election. The results portend big trouble for small business.
The job destruction process has started. We are about 20% of the way through our ramp down process and on schedule to complete the shut down by spring 2009. Watch the financial news and you will see continued job cuts each month. We are not alone in our strategy. Far from it. Atlas has shrugged all over the country.
Like many business owners, we are no longer willing to take all of the financial and legal risks and put up with all of the aggravation of owning and running a business. Not with the prospects of even higher taxes, more regulation, more litigation and more emboldened bureaucrats on the horizon. Like others we know, we are getting out while the getting is, well, tolerable. Many who aren’t getting out are scaling back.
We learned just this week that getting out of business is harder than we thought. Take Republic Windows & Doors of Chicago, where being out of money and out of paying customers apparently does not give a business the right to shut down. Nor does it give that business’ bank the right to withhold credit. According to the unions, Jesse Jackson and the Governor of Illinois (yes, THAT governor), this company must continue to pay its employees salaries and benefits.
But pay them with WHAT? Liberals seem to be clueless as to where “the money” comes from. They love to tax, regulate and redistribute wealth — all the while decrying the very profit motive that created it — something they do not understand. If they did, they would not naively insist that a business that is out of money, out of customers and out of credit stay open so as to pay employees.
And that is but one example of why the lay-offs of November 2008 – which will be part of George W. Bush’s statistical record – fall in reality on the Obama election. Business owners understand that the election of 2008 just gave a lot more power to people who think like these liberals in Illinois. For crying out loud, an Illinois liberal is now “President elect” and he chose another one for his Chief of Staff. He chose Michigan liberals for his economic team. Illinois and Michigan are broke!
It is no secret that owners circulated endless emails leading up to election day discussing lay off plans were Obama to win. Entrepreneurs instinctively understand the danger posed by larger liberal majorities in power. The risk-reward equation and fierce independence spirit of start up businesses are anathema to the class warfare, equality of outcome and spread the wealth mentality of the left.
I blame the Democrats and big-government Republicans myself. Read the whole thing.
Well, I left a comment that he’s exactly right. I had the option of hiring someone late in the fall, and I’m not going to. It’s simple: when times are uncertain, the last place someone with capital spends it is on salaries of permanent employees. For both humanitarian and legal reasons, permanent salary costs are the hardest to cut if the company gets in trouble. You can always sell equipment, cut down on phone, travel, advertising costs, et cetera, whenever and as fast as you want. But it’s much, much harder to cut your salary costs. Better to have yourself and your top salaried people working more on nights and weekends, which costs you nothing, than to take a chance on a new employee whom you can’t drop in a hurry if things don’t work out.
So, obviously, the first thing the guy with capital does when it looks like a bunch of Robin Hoods are taking over the police and prisons is STOP HIRING. Thus, the unemployment spike.
The ironic (and sad for the Republic) part is that the people losing their jobs are pretty much precisly the clueless irrationally exuberant youngsters who are Obama’s political base. So, on the one hand, they reap very quickly what they’ve sown, but, on the other, you can’t expect them to learn the appropriate lesson from this experience. Look for them instead to become further radicalized leftward, to vote for really screwing those damn jobs out of the capitalist pigs.
This process only ever seem to end when the entire economy implodes (the USSR) or nearly implodes (1970s Britain). Makes me wonder whether H. sapiens is actually capable of learning from experience, or whether that’s just a comforting illusion we enjoy.
The part about Republic Windows and Doors sounds mischaracterized — the workers were asking for their severance pay and proper notice that they were going to be laid-off (they were only given 3 days). The workers were asking the management to keep their word and to follow the law. Is that what the author means by it being hard to go out of business? And it was clear that the business had assets that it could use, so this “Pay them with what?” question is kind of silly. There is a connection to the bank bailouts that goes unmentioned in this over-simplified account as well.
Bob @ 2 – Amen.
Bob, that still doesn’t negate the fact that the owner’s and big wigs of a company are still the ones that are taking the biggest risk overall. In fact, your point just bolsters the argument even more. Now they have to liquidate all their assets to owe up to the contracts that were signed when they decided to hire on an employee. That is, if they haven’t already liquidated all their assets to payoff the credit balances that they most certainly have run up in order to try and make it through the tough times.
Josh, I’m not dismissing the risks business owners take. But they are hardly taking the biggest risk, if workers are going to be treated like this. The workers are worried about becoming homeless. In contrast, consider the following circumstances of this particular case:
From the Chi Town Daily News:
A company managed by the wife of Republic Windows and Doors owner Richard Gillman recently purchased an Iowa plant that manufactures similar products, according to public records.
Gillman has come under fire in recent days for abruptly closing Republic’s Goose Island plant and refusing to provide workers there with the 60 days notice and pay required by federal labor law.
Echo Windows and Doors was created two weeks ago and lists Sharon Gillman as its manager, according copies of records obtained by the Daily News from the Iowa Secretary of the State. According to Cook County property tax records, Sharon Gillman is Richard Gillman’s wife.
The couple purchased a $2.6 million Oak Street condo together in 2007, according to property records.
—
Note that 1.75 million dollars was all that was needed to allow the company to fulfill its obligations. And where did the money come from to buy the Iowa plant, and how does the timing of that purchase mesh with giving workers three days notice?
I run a small business in CA.
If you add up all my taxes, income, sales,sdi,ssi,property, etc… my marginal effective tax rate is well over 50%. (Just income is 44.3) I have chosen for the last few years to spend less time on my business and more time working on other projects. I have been the creative force behind the vast majority of the products my company sells.My creative energies provide a significant number of people with a Job. I could work harder and create twice as many new products, but then I’d give away half of whatever I created. I’m having more fun playing with rockets (Unreasonable Rocket). I have enough income that I don’t sweat the mortgage every month and can spend on some serious hobby projects. My choice to work harder/less hard is a marginal decision. Making my work more monetarily rewarding would give me more incentive to work harder. It would probably mean I’d have to hire more people. It also effects my hobby spending. The creative part of the rocket hobby is the designing and creating.
Some times I make the parts myself on my CNC mill, some times I send them out and have them made… For every I send them out for every $ I spend in hobby mode, I have to earn 2. So it makes all the stuff I would choose to send out twice as expensive. Thus I often do it myself as it can be significantly cheaper.
This is just the rational argument. The less rational argument is a visceral dislike for the bloated government and a desire to try to cut off its food supply.
An odd example:
If you get a speeding ticket in CA you can go to Traffic School, It takes about 4 hours and
300 to 400 in cash for fees etc. This 400 feeds the beast it pays for the CHP person to write tickets, the court to process them etc… The redlight and speed cameras demonstrate in a very real way that the its all about revenue rather than traffic safety. (The number of Red light accidents go up when redlight cameras are installed because people stop abruptly afraid they run the red, the severity of the average accident does go down so its awash at best. )
There is a law firm in LA that for $1600.00 with
aggressively fight your ticket. They have a 96% success rate. It usually generates lots of extra work for the CHP and courts costing them $ and depriving them of revenue. So its not really rational to pay $1600 to avoid $400, but
its a rational choice if you believe the bloated creature is destroying what made America a great country.
Bob, I think you’re arguing trees because the forest is hard to deny. Tsk.
I also think you’re hugely wrong about who takes the big risk in starting up (or growing) a firm. If the firm folds, the employees are out of a paycheck, period. If they become homeless because of that — well, whose fault is that? That you saved exactly zero while you had a paycheck? (And please let us not have this canard about “living paycheck to paycheck.” I’ve never met someone who couldn’t save something if absolutely necessary, e.g. by living in a dump, eating macaroni and cheese, no cell phone, no cable TV, keeping the thermostat at 65 and wearing a sweater, and so forth.)
On the other hand, it is quite normal for a small businessman to commit all his personal savings, everything he’s accumulated in decades of working for someone else. If the firm goes under, he loses it all, not just the prospect of a future paycheck, but also everything he’s worked for in the past.
Furthermore, if he’s not incorporated (typical for very small firms) he’s personally on the hook for whatever debts the business leaves when it crumps. When the employee loses his job, at least he’s not saddled with company debts that can take years if not decades to pay off.
This is why the capitalist gets the big rewards — because he takes the big risks.