Archive for the ‘Unemployment’ Category

Colleges and Private Sector Employers Cut Worker Hours, Avoid New Hires to Avoid ObamaCare Fines

In Obama Administration, ObamaCare, Unemployment on January 20, 2013 at 1:48 am
Eddie Bauer store closing, Rockford, IL.  Jan. 20, 2013.  Photo by author.

Eddie Bauer store closing, Rockford, IL. Jan. 20, 2013. Photo by author.

Colleges and private employers are cutting hours to stay under 30 hour per week threshold for paying $2,000 “ObamaCare” annual fines.  Others are using independent contractors rather than hire full-time workers to avoid the 50-employee threshold mandating insurance coverage or fines.

It is fascinating to watch how it plays out.  Any massive law such as “ObamaCare” will have unexpected impacts, many negative.  Middle of the night sessions that create laws cannot possibly anticipate – or control – how everyone will react.  We read how colleges are cutting adjunct hours to keep them under 30 hours, since adjuncts generally are not offered healthcare.  [1] There will be additional effects.  The WSJ article quotes Dan King, executive director of the American Association of University Administrators, saying colleges fear ObamaCare will increase unionization efforts of adjuncts.  Why?  The reason being they will end up with fewer hours, pressuring adjuncts, who earn only a fraction of what full professors earn.

Private sector employers, “particularly restaurant operators, have been moving to cut hours to reduce the number of workers to whom they would be required to offer health insurance.” [1]

A Wall Street Journal article [2] goes into detail about one company that is actually expanding, but doesn’t want to crack the 50 full-time employee ObamaCare threshold.  As a result, the owner will hire independent contractors, who, of course, receive no benefits at all.

During her two-plus years in business, Elizabeth Turley has steadily recruited new employees for her apparel company, Meesh & Mia Corp., to keep pace with its rapid growth. But this year could be different. Instead of increasing her staff, she plans to hire independent contractors for tasks that can be outsourced, such as marketing and product development.

Her reason? Meesh & Mia is on the cusp of having 50 full-time employees. If the company hits that threshold, it will have to provide health coverage that meets government standards or potentially pay a penalty.

Elizabeth Turley, CEO of Meesh & Mia, plans to hire independent contractors this year because of health-insurance changes. Ms. Turley looked at fabric options at a trade show Tuesday.

“We are poised this year to more than double or even triple business,” says the 58-year-old Ms. Turley, whose Idaho-based company makes “spiritwear,” or clothes with licensed college and football-team colors and logos. “And then this happened…. We have to find another way to get there.”

Even though the rule doesn’t go into effect until early 2014, a business could be subject to the so-called employer mandate if, during 2013, it averages 50 or more full-time equivalent employees, according to recently released regulations from the Treasury Department and the Internal Revenue Service.

Employers have the choice to calculate their head counts by averaging the full 12 months of 2013 or a consecutive six-month period during the year.
Many small-business owners haven’t yet realized that the way they structure their firm in 2013 could determine their status under the law in a year’s time.

The government issued the little-noticed regulatory guidance on Dec. 28. Ms. Turley says she wasn’t aware of the rules until a Journal reporter informed her.

….Typically, independent contractors are less expensive for employers, who don’t have to pay taxes on wages or supply benefits, as they would for their employees. Reliance on independent contractors has increased over the years, particularly in the recession, when employers sought less expensive labor.

How far does the hour-cutting and non-hiring go?  No one can tell.  Reduced hours may mean crimped service.  I suspect one impact of the law will be more low-income workers working two part-time jobs of approximately 25 hours each, as employers do everything possible to avoid cracking 29 hours per part-time employee.  Others will work as independent contractors rather than obtain full-time employment.  Either would be examples of unintended consequences of the law.  The article about contractors points out the IRS rules are complex, leading to more disputes and audits.

If anything, [audits] will increase more” in light of the health-care law, says Monique Warren, partner at workplace law firm Jackson Lewis LLP in White Plains, N.Y. “Employers have to be real careful about calling someone an independent contractor.”

Government auditors would determine whether a worker misclassification triggers the health-care law’s employer mandate. That means the stakes are higher for employers, particularly those who have close to 50 full-time employees. They could have to pay back taxes in addition to potential penalties associated with the health-care law, should the revised classification push their employee headcount over the threshold.

“Some businesses may be tempted to classify someone as an independent contractor to avoid the headcount that could subject them to the [employer mandate],” says Edward Lenz, senior counsel at the American Staffing Association, an Alexandria, Va., lobbying group for temporary and contract staffing firms. “If anything, the risks of misclassifications are exacerbated by the [health-care law].”

Adding to the confusion for small firms is that an employer’s view of who is an independent contractor may not align with the government’s. The guidelines defining independent contractors “aren’t black and white,” says Ms. Warren. “To some extent, it is deliberately vague. The IRS can’t… account for every different situation.”

Simply juggling schedules if you’re a part-time worker working 20-25 hours per week at two different employers is a challenge.  In today’s economy, finding one, nevermind two, jobs is tough enough.  More than a few workers will find their hours cut from ObamaCare, reducing their total earnings. 




Store closing picture by author.  IRS Building from Wikipedia Commons.

How Does Utah Get 6.0% Unemployment?

In Economy, Job Creation, Unemployment, Utah on August 19, 2012 at 1:09 pm

In this time of economic stagnation and perpetual high unemployment, it is useful to look at the handful of states adding jobs and providing lower-than-average jobless rates.  Utah continues to be successful.

Utah’s 6.0% unemployment rate compares to California 10.7%, tourism-dependent Nevada’s 12.0% and Illinois 8.9% [1]  Utah was the third-fastest growing state in the decade ended 2010. [2]

The state offers good jobs.  Utah has the 14th highest median household income of the 50 states, ranking ahead of New York State and Illinois. [5]

Employers like Utah.  Its 5% corporate income tax is 1.6 points below the national average.  The Wall Street Journal points out that tax rate has been unchanged over the past 15 years, whereas New Jersey has revamped its tax code four times since 2000. [3]  Employers prefer planning with confidence in steady regulations and tax rates. 

The state is considered business friendly.  “Barriers to business creation are minimal,” as Utah ranked fourth amongst states in Pacific Research Institute’s most recent US Economic Freedom Index (from 2008). [3]

The economic growth and state-level fiscal sanity is even more impressive given Utah is the nation’s youngest state with the nation’s highest fertility rate. [4]  One quarter of youth are minority. [3]  Large numbers of young children cost the schools and require other infrastructure but are future taxpayers.

Did Utah embark on a spending binge to battle the economic turn-down in 2008?  No.  Utah cut its budget with state-agency budgets sliced an average 19%, totaling $2 billion cut in the first two years of the downturn. [3]  The economy buzzed along.

[1] July 2012 data, retrieved 8/19/12.


[3] A nice full-length Utah story is behind the pay-wall at the WSJ:


[5], 2009 data, retrieved 8/19/12. 

Pictures from Wikipedia Commons.

Statistics Show 2009-12 The Weakest Economic Recovery Ever

In Economy, Obama Administration, Regulation, Unemployment on April 11, 2012 at 1:16 am

The worst economic recovery ever? 

Yes, this ‘recovery’ is worse than those following the Great Depression and the near depression of the 1980, 1981-2 double dip recessions.  Deep recessions are usually followed by broad-based booms.  Consumers and corporations have delayed needs that are typically fulfilled through accelerated purchases.  Twenty Twelve does not have a feel even remotely like robust 1984.  Few would refer to today as “Morning in America.” 

An excellent free piece (not behind the paywall) at the Wall Street Journal comes from Edward P. Lazear. [1]  Highlights follow:

The Great Depression started with major economic contractions in 1930, ’31, ’32 and ’33. In the three following years, the economy rebounded strongly with growth rates of 11%, 9% and 13%, respectively.

The current recovery began in the second half of 2009, but economic growth has been weak. Growth in 2010 was 3% and in 2011 it was 1.7%. Who knows what 2012 will bring, but the current growth rate looks to be about 2%, according to the consensus of economists recently polled by Blue Chip Economic Indicators. Sadly, we have never really recovered from the recession. The economy has not even returned to its long-term growth rate and is certainly not making up for lost ground.

Contrast this weak growth with the recovery that followed the other large recession of recent decades. In the early 1980s, the economy experienced a double-dip recession, with contractions in both 1980 and ’82. But growth rates in the subsequent two years averaged almost 6%. The high growth that persisted throughout the 1980s brought the economy quickly back to the trend line. Unlike the current period, from 1983 on, the economy was in rapid catch-up mode and eventually regained all that had been lost during the early ’80s.

It would be difficult to argue that government polices over the past three years have enhanced confidence in the U.S. business environment. Threats of higher taxes, the constantly increasing regulatory burden, the failure to pursue an aggressive trade policy that will open markets to U.S. exports, and the enormous increase in government spending all are growth impediments. Policies have focused on short-run changes and gimmicks—recall cash for clunkers and first-time home buyer credits—rather than on creating conditions that are favorable to investment that raise productivity and wages.


Pictures from Wikipedia Commons.

A “Blue” Economy: 12.2% Unemployment & Vacant Storefronts in Rockford & Freeport, Illinois

In Economy, Illinois, Unemployment on February 5, 2012 at 3:22 am

Remember when gas was $1.86? Long vacant gas station on main drag (Bus'n US Route 20), one block from county courthouse, Downtown, Freeport, Illinois.

Vacant storefronts in downtown Freeport, Illinois.  Read the homemade sign on the left: 3 story commercial building for sale for $30,000.
Today, we get behind the numbers to see what a high unemployment, dying “blue state” city looks like.  The unemployment rate in very ‘blue’ Illinois is 9.8%, [1] more than a percent above the national rate.  The Illinois economy is dire, no question.  The Rockford-Freeport-Rochelle Metropolitan Statistical Area had one of the highest unemployment rates in the entire United States at 12.2%. [2]  Freeport is located 25 miles due west of Rockford on the busy four-lane, limited access highway U.S. 20. 
On Forbes’ annual list of the most miserable cities, Rockford is usually there.  “Rockford has unusually high violent crime rates for a city of its size. Most notably, the city has the fourth highest rate of aggravated assault in the country, with 10.5 cases for every 1,000 citizens in 2010. During the same period, 20 murders occurred, almost double the number in 2000.” [3] “Property tax rates were fifth highest in the country in 2010. The median tax bill was $3,234 on home values of $136,000 for a rate of 2.4 percent.” [4]  Freeport is smaller and included in the greater Rockford unemployment data above. 
I was in Freeport today and took a few pictures downtown.  Most old cities have a ‘bad side’ of town.  I did not cherry pick bad areas for pictures.  The pictures are not taken in one of the far-worse looking slums of Freeport (most cities have a slum), but rather, these pictures are all in the downtown area.  In fact, on the southeast edge of downtown are two square blocks of hulking, long vacant factories, the one-time home of the manufacturer Rawleigh, which left some 45 years ago.  Companies come and go; what is concerning is when companies that left a half century ago are never replaced.  The main drag, Business US 20 has no less than four abandoned gas stations spread through various neighborhoods, including national names like Mobil and CITGO; this is a bad sign about the local economy.
Freeport is a county seat (Stephenson County), which guarantees a certain amount of economic stability with the offices of courts, sheriff and other administrative government bodies.   Unfortunately, there are few prosperous commercial areas in Freeport.  Like most cities, there are some big box stores on the edge of town (Wal-Mart, Menard, K-Mart, Shopko, Staples) but even the retail edge of town has a surprising number of vacant retail properties.
The chart below shows how Freeport has been in decline, though it briefly turned around its population declines in the 1990s, before more recent declines.
Year Freeport Population
1970 27,736
1980 26,266
1990 25,840
2000 26,443
2010 25,638
  Chart by Author [6]
Freeport is located on a busy highway that runs to Rockford, before allowing one to take either I-39 or I-90 to Madison, Bloomington or most importantly, Chicago.  Freeport is about 110 miles from Chicago, but less than 80 miles from Chicago’s northwest suburbs.  Both Rockford and Freeport are located reasonably close to Chicago with good expressway access, which could be an economic selling point.
I should point out I do not mean to pick on Freeport, but rather to use it as an example of what has been happening in hundreds of small cities in high tax, pro-union “blue” states.  Freeport and its eastern neighbor, Rockford, Illinois have the unfortunate distinction of also being part of politically corrupt and ineptly governed Illinois, where the last two Governors reside in jail, at the same time both cities are a very short drive from more business-friendly Wisconsin and only an hour from right-to-work Iowa.  The unemployment rate in Wisconsin is much lower at 7.1% and Iowa even lower, just 5.6%! [1]
Those state comparisons mean something.  Certainly when you drive just 20 miles north of Freeport into the small city of Monroe, Wisconsin, the differences are great.  Monroe is more prosperous, has newer industrial plants and lacks the vacant buildings of a Freeport.  Iowa is a bit further, but there is a contrast between, say, similar sized Clinton, Iowa, on the Illinois border.  Clinton has several large, new industrial facilities, especially a newer complex from ADM. 

More vacancies, downtown Freeport, Illinois

I think people in Illinois need to be honest and ask themselves why the Illinois economy is so bad.  I know liberals who love to make excuses for Illinois.  They say Illinois is too cold.  Except Iowa, Indiana and Wisconsin are no warmer!   Lots of ‘cold’ states have better economies than Illinois.  Then they say Illinois is a better place culturally (meaning Chicago) than Wisconsin or Iowa or Indiana and companies should want to open up in Illinois because of, say, the wonderful Lyric Opera in Chicago.  The cultural benefits may be real but are not winning the race for jobs.  These same liberals are then stuck essentially telling people in Freeport and Rockford they are better off unemployed because Illinois is a very blue state and if companies won’t locate in Freeport or Rockford because of Illinois’ adversarial attitude toward commerce, so be it.  Live ‘blue’ or die.
Freeport’s people are friendly and I have no reason to think they are any less hard-working than anyone else.  I have known many, many people over the years from Freeport and Rockford and think well of them.  The area was long respected as a home to many highly skilled blue-collar workers.  There is some history there and a sense of civic involvement.  So why is the local economy so poor now? 

More vacancy on main drag (US Bus'n 20), Freeport, Illinois

Surely there are many reasons.  Not only Rawleigh but many other companies have left Freeport.  Newell-Rubbermaid company moved its corporate headquarters to Atlanta last decade, taking some good jobs away.  But, in the end, discussing why such and such a company left does not really do justice to the numbers.  People can make excuses.  But why is unemployment so much higher in Illinois, especially in small cities like Rockford and Freeport? 
One reason has to be how rarely anything new moves in.  A city like Freeport or Rockford seems to be focused on a sort of whack-a-mole battle to keep what it has from leaving; Illinois does this at its state level with tax incentives for whichever big Illinois employer is asking for them.  If economic development were a sport, Illinois would be accused of playing defense with no game plan for offense.  Driving around Freeport you see some sizable manufacturing operations: a tire plant, several Honeywell locations and a Vitners potato chip plant.  But you see nothing of note that has been added in recent years. 

Blue Economy, Downtown Freeport, Illinois

When you look at Freeport or Rockford, you see a once proud city of good citizens stuck in a deep economic rut.  Freeport keeps losing residents, which only makes a bad situation worse as city infrastructure stays the same but there are fewer taxpayers to support it.  I think the solution to Freeport’s problems lies largely outside of the city’s control.  The issue is the Illinois business environment.  It is fascinating how much better off nearby Wisconsin and Iowa are.  It is as if there are invisible “Do Not Cross” lines at the Illinois borders that tell employers to stay away.
I sincerely think one of Illinois’ greatest problems is Chicago’s political domination of the State.  Chicago can muddle through high levels of taxation and anti-business legislation because it has two of the world’s elite private universities (Northwestern & University of Chicago), cultural amenities that people will pay extra for, and Chicago is a services economy.  All the computer programmers or other young professionals at consulting firms or Groupon in Chicago are not impacted at all by pro-Labor Illinois rules.  But, the rest of Illinois does not have Lake Michigan as its front yard and lacks the universities, services sector, airports and the cultural amenities Chicago has.  The rest of Illinois simply cannot compete with other states.  Downtown Freeport and a sad number of other Illinois places show the result.  It impacts people like the owner of the three story Freeport commerical building who is asking only $30,000 for his vacant building (see second picture from top).  As do the legions of unemployed in Freeport, Rockford and other Illinois cities outside of Chicago. 

Another vacant storefront in downtown Freeport

[1] December 2011 state unemployment rates from, retrieved 2/5/12.
[2] December 2011 data retrieved 2/5/12 from
All pictures by author.

There is No Santa Claus for Illinois Unemployed after 2011 Income Tax Hike

In Illinois, Income Tax Rates, Job Creation, Unemployment on December 2, 2011 at 12:17 am

People told me a Christmas tree dealer’s showroom in nearby North Barrington, Illinois is great for kids because it displays some 200 decorated Christmas trees.  My young sons happen to be connoisseurs of garish Christmas lights.  Thinking that walking the boys through an indoor forest of lit Christmas trees would occupy some free time on a gray, rainy Saturday, I looked up Tree Classics to check hours and address.

I was surprised when the Tree Classics website only showed an address in Wisconsin. [1]  Could I have the wrong name?  I tried an internet search and sure enough, Tree Classics was listed in reviews and in business directory as located on North Pepper Road in North Barrington, Illinois.  Except that in 2011 Tree Classics moved a bit closer to the North Pole. 

These days, it seems most anything not bolted down is leaving Illinois for Wisconsin, Indiana, or some other state.  Motorola, Caterpillar, Sears, Navistar, Chicago Board Options Exchange and the Chicago Mercantile Exchange are some of the big Illinois employers demanding tax concessions to keep them in the state. [2] [3]  “We’re not real happy with the tax rates and we’ve made our feelings known on the subject,” said Irene Rosenfeld, CEO of Illinois-based Kraft Foods. [4]

I could not find any articles about why Tree Classics left Illinois.  It might be about taxes.  Chicago is a much larger market than Milwaukee which makes the move questionable, but perhaps they have their reasons.  Maybe something else dragged Tree Classics out of Illinois.

As we saw in my post, smaller companies are leaving Illinois.  Smaller companies do not have the pull to extract tax breaks from the state legislature.  The departure of a company with 50 or 75 employees may not even get a notice in the newspaper, but the state’s job market shows the toll. 

The Department of Labor graph below clearly demonstrates how the Illinois income tax grinched the Illinois job market:

Pertinent facts: 

1. From January 2010 to December 2010, Illinois employment grew by 173,795 jobs.  The Illinois unemployment rate declined from 11.2% to 9.2%, converging with the national average.

2. In January 2011, Illinois passed a 66% increase to the personal and corporate income tax rate, made retroactive to January 1, 2011. [4]

3. After Illinois companies had a few months to react to the tax increase and explore their options, the state unemployment rate surged from 8.8% in March to 10.1% by October.

4. After the December 2010 peak of 6,052,731 jobs, Illinois lost 93,787 jobs through October.

5. The US unemployment rate has been steady in 2011, being at 9.0% in both January and October. [5]

Why did 2010’s job growth in Illinois abruptly end in 2011, then reverse into job losses and a 10.1% unemployment rate even as the US national unemployment rate held flat at 9.0% in 2011?  Might income tax rates have something to do with it?  Job losses continue:  we have breaking news literally today that Unilever is eliminating all 800 office and manufacturing jobs at the Melrose Park, Illinois headquarters of its Alberto-Culver unit. [6] 

There is no Santa Claus for Illinois workers in 2011 and my sons need another interest to replace seeing groves of articifical Christmas trees.  Perhaps they could count moving vans on the interstates leading out of Illinois?

  How the Grinch Stole Christmas cover.png






[6] 2010 and 2011 employment and unemployment data and graph retrieved 12/1/11 from (US) and (Illinois).


Grinch pictures from Wikipedia Commons; Christmas tree picture from

Obama Jobs Solution: Suing Employers For A Job?

In Economy, Job Creation, Lawsuits, Obama Administration, President Obama, Unemployment on September 27, 2011 at 8:07 pm

The “Jobs” Bill that President Obama sent to Congress “includes a provision that would allow unsuccessful job applicants to sue if they think a company of 15 more employees denied them a job because they were unemployed.” [1]

While I understand the frustration of the unemployed, the President’s idea is likely to be counterproductive and lead to even less hiring of the unemployed.

Lawrence Lorber, a labor law specialist who represents employers, said Mr. Obama’s  proposal “opens another avenue of employment litigation and nuisance lawsuits.” [1]  Most employers are small and do not have lawyers on staff to defend against these lawsuits.  Even larger companies with a slew of in-house legal counsel have no desire to be sued over matters that are difficult to disprove.

Why would an employer discriminate against the unemployed?

(1) It is an open secret in the business world many employers formally downsize under-performing employees in order to avoid law suits.  A downsizing of just one person in a large company may actually be a polite way of firing an underperformer.  Most workers are the member of some protected class (female, racial minority, veteran, over age 45, etc.).  If the underperforming employee has not made themselves easy to fire (e.g. by repeatedly skipping work), it can be difficult to prove in Court the subjective judgments that a particular employee’s work is mediocre or worse.  Defending a wrongful termination case is something many companies try to avoid.  Even when the company wins, it racks up legal expenses.  Many companies feel it is better to pay a small severance package and let the employee be downsized “not for cause” rather than terminated “for cause” at the risk of a lawsuit.

This open secret is one reason employers have long preferred to hire someone employed at another company rather than someone who is unemployed.  

(2) Employers think other companies let go of underperformers first and hold on to top performers.  The thinking is that, when XYZ Company lets 10% of its workforce go, it probably is mostly letting go of its 10% least desirable employees.  

(3) Lastly, companies feel that people who are out of the workforce for extended periods of time, such as two or three years, may lose some of their work-related skills.

Are these beliefs always correct?  No, though they surely are at least partly accurate some of the time.  In a normal job market, these biases against the unemployed are not a big deal.  Does every employer feel this way?  Undoubtedly no. 

Unemployment surely is always a disadvantage, but America has traditionally had enough jobs to go round so that most any able-bodied unemployed person would, sooner or later, find something.    In today’s bad job market, the already existent bias against the unemployed is a bigger issue for the unemployed because there are so few jobs available. 

There are other small biases that exist in hiring: in favor of the tall, in favor of the attractive and in favor of people with degrees from prestigious universities.  Studies have shown taller people earn more [2] and more attractive people earn more [3].  These facts add insult to injury to men because studies also show women prefer taller and wealthier men; attractiveness is universally desired in a mate.  But, I would not recommend a federal statute banning discrimination on account of height; how does one even begin to measure such discrimination in a real world situation?  Would it not open to the door to frivolous lawsuits?


What would happen if the President’s bill passes and the unemployed are allowed to sue employers for discrimination?  Would the long-term unemployed now quickly find jobs?   I think the answer is no

Let’s think ahead and assume President Obama’s bill becomes law.  It is not clear that employers who are predisposed against the unemployed would be any more likely to actually hire the unemployed.  There are myriad reasons an employer can give (“doesn’t fit our culture”) for passing over an applicant.

But, the new law would make it far more risky to interview the unemployed.  Any unemployed person who applies for a job but is not hired would have legal standing to try to file a lawsuit against the employer.  The safest bet for an employer hoping to avoid these lawsuits would be to try not to interview the unemployed in the first place.  How might they do that?  Obvious options would be to employ recruiters who cold call people already employed elsewhere, look to internal (already employed) candidates, outsource to another country, or automate rather than hire anyone at all.

I know this is cold comfort to the long-term unemployed, but the idea of forcing employers to hire the long-term unemployed through lawsuits will backfire and make it even tougher for the unemployed to get interviewed and may result in fewer new jobs.  A much better idea to actually accomplish that goal would   be a carrot, rather than the stick:  a tax credit for hiring the long-term unemployed.

Unfortunately, this is another example of President Obama- who has no experience whatsoever in private business – proposing something that would actually be counterproductive.   The continuous flow of proposed high taxes, new regulations and laws such as this one creating a new protected discrimination class of unemployed people are exactly what is making American business skittish to hire at all.  The private sector creates jobs, not the government through new laws allowing for more lawsuits.

As always, comments are welcome.




Pictures from Wikipedia Commons.