Wednesday, October 15, 2008

Ready... Aim... Fire!

Tyler Cowen summarizes Obama's economic plan. I don't get the $3,000 per new hire. If Obama's elected, won't employers just fire lots of people November 5th? They could rationalize it on economy/market uncertainty and wait for Obama's new hire bonus to kick-in before raising head count again.

Update: Here's the bullet point from Tyler's post:
— for the next two years, give businesses a $3,000 income-tax credit for each new full-time employee they hire above the number in their current workforce;
The more I think about this, the more I think it's going to drive up unemployment in November when employers just fire lots of people November 5th. Doesn't "current workforce" mean the headcount of companies when the bill is signed? Assuming I'm wrong and that "current workforce" means workforce in October 2008, doesn't that create the incentive for employers to fire workers Nov 3rd and let them know they'll all be re-hired on the 5th if McCain wins? Is Obama intentionally trying to make workers worry about their jobs? And how does this restore confidence in the markets?

Please tell me I'm missing something....

1 comment:

Doug Schulz said...

As you alluded to, it is really easy to fix the problem you point out. Just back date the reference point. You might also have an issue with people holding off on new hires waiting for the law to pass so they can get their credit, but that would also be pretty easy to fix.

If its a tax based proposal then you could just judge it tax-year to tax-year. So you compare your employee level from this tax year to last.

Also, any company that fires people immediately after an Obama election based on campaign proposals is a rank idiot anyways because Obama doesn't get to pass laws. He gets to propose them to Congress. So there are no guarantees that the firings would have the affect the company would want. A smart company would wait to see how the legislation gets going before making that kind of move.

You are also assuming that the employee is just a revenue sink and does not actually add any value to the company. If that's the case, that company probably should have fired them before this. If an individual employee does not provide $3,000 value in a single year to any company then they probably should be fired.