A month ago, we blogged why hiring incentives are a bad idea.
Apparently the stumblebums at the White House don’t follow the HomaFiles.
Last week, one of the globs that Obama threw against the wall was a one-time $4,000 tax credit for every person hired – provided that they’d been unemployed for at least 6 months. .
At first blush, it sounds like a good idea.
But it’s not.
First, no sensible employer is going to make incremental hires for a single year of benefits. If they do, there are equal odds that they’ll jettison the employees when the waiver expires.
More important, the program punishes “responsible” companies by rewarding hard-hearted ones.
Let me explain.
Say, company A laid off 20% of its workforce during the recession – largely due to the business slowdown, but also the result of opportunistic house-cleaning – getting rid of slackers and dolts.
Comparable company B laid off a couple employees due to the downturn, but – took its lumps – and kept most of its employees on the payroll, even though many weren’t really needed.
Along comes the hiring incentive.
Which company gets it?
Yep, company A – the company that shed employees.
What does company B get for standing by its employees.
Nothing.
Sound fair to you?
Sounds like punishing responsible behavior … again!
And, the program is likely to encourage dysfunctional behavior.
For example, now that the idea has been proposed … why in the world would any company hire employees until the legislation is either passed or killed?
My bet: there will be a marginal decrease in hiring as companies wait and see.
Further, ruthless companies may start forcing attrition among recent hires, in order to replace them with tax-incentivized folks off the unemployment rolls.
Net gain: zero.
Behavioral note:
How can they force attrition?
Easy.
Just start assigning low seniority employess undesirable work schedules, e.g. split shifts
Most often, companies won’t step-up their hiring, they’ll just bag the tax credit for folks they were going to hire any way ((think Cash for Clunkers and Home Buying Credit).
In marketing parlance, it’s called “dilution”.
Never ceases to amaze me how naïve the Administration is re: how businesses work …
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