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Thread: Obama Tells Companies to 'Step Up' and Hire Workers

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    Re: Obama Tells Companies to 'Step Up' and Hire Workers

    What is a companies primary function? To make money for it's shareholders. All else is secondary. I am not saying that is good, or bad. I am saying that's the way it is.

    You can't change the nature of the beast by telling the beast to 'step up'.

    When companies need workers, they will hire them. When they don't, they won't. It doesn't get much simpler than that... and the President doesn't seem to understand that.

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    Re: Obama Tells Companies to 'Step Up' and Hire Workers

    Quote Originally Posted by StillBallin75 View Post
    Businesses don't grow just because someone tells them to. That being said, Obama's frustration is understandable.
    agreed......

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    Re: Obama Tells Companies to 'Step Up' and Hire Workers

    Quote Originally Posted by MaggieD View Post
    Companies do not hire people they don't need. Many of these companies are probably just holding their own in not laying off people and making an investment there.

    Edit: Perhaps the better route for a Commander-in-Chief would be to say to large companies: "Now is the time to invest in the future and invest in the American economy -- to grow your business."
    I think he said exactly what he should have said.

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    Re: Obama Tells Companies to 'Step Up' and Hire Workers

    From a political standpoint where far more than economic interests are involved (social welfare, need to build support for re-election, etc.), it makes sense for the President to call upon companies to hire. After all, most of the nation's jobs exist in the private sector.

    However, at the company level, economic and financial considerations drive hiring. For a company to take on new workers, it needs to be reasonably confident that aggregate demand for its products/services will grow at sustained levels at which productivity increases from capital equipment won't be able to meet that demand growth. Capital investments represent one-time costs. Hiring represents a stream of recurring costs, hence greater risk. That is why increases in capital equipment expenditures typically lead increases in hiring when the economy is coming out of a recession.

    A company needs to have the financial resources and cashflow available to take on new workers (salaries and benefits entail recurring expenditures). Some companies are in such a position and are hiring. Some are not. Indeed, as is the case with most economic recoveries, the current recovery has been uneven. Some sectors have been growing more rapidly than others. A few e.g., housing-related, remain still sluggish or even contracting. Some reductions in taxpayer subsidization for the housing industry e.g., the federal government plans to stop providing financing for highest-leverage housing purchases via rolling back the qualifying limit, could provide further headwinds.

    Furthermore, the long-term has some significant risks. With respect to the U.S., household debt remains extremely elevated. The nation's federal debt has risen rapidly on account of the recent financial crisis/recession (the increase as a share of GDP is actually par for the course for housing bust-driven recessions/systemic financial crises), wars, and gradually increasing structural pressures associated with the aging population/mandatory spending programs. The general absence of balanced budgets at the state level--not balanced when long-term health/pension commitments are considered--has put a substantial strain on states' finances.

    Fiscal consolidation will more than likely unfold down the road, even if the current Congress and President may more or less punt when the decision to raise the debt ceiling arrives (by punt, I mean that modest spending reductions would be specified, with more ambitious fiscal consolidation measures being defined as goals or limits, but not policy changes). If the debt ceiling is not raised in a timely fashion, a debt/currency crisis could erupt in a worst-case scenario e.g., if the U.S. actually defaults. If the U.S. avoids default by sharply rationing spending, a fresh economic contraction would likely materialize. If the U.S. punts and then does little down the road, the risks of a debt crisis would be on the increase. Absence of a credible fiscal consolidation plan would likely lead to a downgrade in the U.S. credit rating in the 2012-2014 timeframe and higher interest costs. The altered risk profile would amplify the challenges of fiscal consolidation, making the task more urgent and more difficult. Hence, fiscal consolidation is more likely than not in the medium-term and beyond.

    What happens when fiscal consolidation occurs? There is a contractionary effect. That means aggregate demand will grow more slowly than would be the case without the need for fiscal consolidation. For firms, that means slower revenue growth. For households, that could mean slower income growth and that situation could interact with extreme levels of household debt that persist. Tax hikes, and some measure of tax hikes are likely, also reduce after-tax profits and personal incomes. Therefore, if businesses are looking to the medium-term and beyond in their strategic planning, there are some compelling reasons for caution. One should bear in mind that in an era of slower revenue growth for firms (again the effects would be uneven on an industry-by-industry basis) strategic errors made by companies would be more costly due to a reduced margin for error, pressure for cost-savings would be higher, and better targeting of customers (not every customer is profitable) would be important, etc. Resource allocation and hiring decisions will be made in such a context and the result will probably be slower hiring than would otherwise be the case. Of course, some professions would be in higher demand e.g., health care professionals (for which the U.S. might eventually have to import labor to reduce that industry's chronic excessive cost growth problem).

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    Re: Obama Tells Companies to 'Step Up' and Hire Workers

    Quote Originally Posted by Whovian View Post
    When companies need workers, they will hire them. When they don't, they won't. It doesn't get much simpler than that... and the President doesn't seem to understand that.
    I think he understands that.

    When some businesses start making excessive profits in part because of low employment, then they should be called out for it and that's what is happening here. It's funny to me how everybody besides big business is expected to make sacrifices in a poor economy, but corporations are exempt because "that's just how they work."

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    Re: Obama Tells Companies to 'Step Up' and Hire Workers

    This sounds like a 3rd-grade teacher asking her class, "children, tell me some things that would make businesses do better?"

    And Obama gave a very 3rd-grade response.

    I swear, the man understands nothing.

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    Re: Obama Tells Companies to 'Step Up' and Hire Workers

    Quote Originally Posted by theplaydrive View Post
    I think he understands that.

    When some businesses start making excessive profits in part because of low employment, then they should be called out for it and that's what is happening here. It's funny to me how everybody besides big business is expected to make sacrifices in a poor economy, but corporations are exempt because "that's just how they work."
    did not say they are or should be exempt from 'making sacrifices' as you call hiring new workers in this case.

    I simply said it doesnt work that way. Unless they NEED the workers, they will not HIRE the workers, regardless of how insane their profits might be. That is how it works.

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    Re: Obama Tells Companies to 'Step Up' and Hire Workers

    Businesses don't only hire people when they absolutely need to. I think many businesses are being more cautious than they need to be regarding hiring at the moment. I have no problem with what Obama said.
    (avatar by Thomas Nast)

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    Re: Obama Tells Companies to 'Step Up' and Hire Workers

    Quote Originally Posted by donsutherland1 View Post
    From a political standpoint where far more than economic interests are involved (social welfare, need to build support for re-election, etc.), it makes sense for the President to call upon companies to hire. After all, most of the nation's jobs exist in the private sector.

    However, at the company level, economic and financial considerations drive hiring...
    excellent analysis.

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    Re: Obama Tells Companies to 'Step Up' and Hire Workers

    Quote Originally Posted by Whovian View Post
    did not say they are or should be exempt from 'making sacrifices' as you call hiring new workers in this case.

    I simply said it doesnt work that way. Unless they NEED the workers, they will not HIRE the workers, regardless of how insane their profits might be. That is how it works.
    I think hiring workers in place of multi million dollar bonuses would be considered sacrifices.

    It doesn't work that way? Exactly, and people just accept that for some reason because corporations exist as some holy entity that should not be forced to change. I could say the same for unions. They work to get teachers and police officers great salaries, benefits and pensions and yet they are constantly told to change during poor economies and make sacrifices.

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