Gorilla in the room: Obamacare and unemployment

Gorilla in the room: Obamacare and unemployment

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Cartoon by Branco, courtesy LegalInsurrection.
Cartoon by Branco, courtesy LegalInsurrection.

WASHINGTON, June 10, 2014 – The Prudent Man spotted an AP story on the bizarre American employment situation via CNBC this morning. It’s interesting to a point, but still fails to confront the elephant in the room: the instituting of Obamacare and its massively depressive effect on job creation.

Let’s take a look at a few key observations in the AP story. First, let’s look at the premise and the existential question that follows:

The unemployment rate has been on a slow downward trajectory since the recession ended nearly five years ago. While the overall jobless level has dropped to non-recession levels, the number of the working-age people with jobs is barely over 6 in 10, hovering at a level reminiscent of the late 1970s.

In May, the U.S. workforce-participation rate—the combination of those with jobs and unemployed workers actively seeking them—was just 62.8 percent, the same as the month before. Job markets have been essentially flat since October.

Where have all the missing workers gone?

That’s a good opening and a good question. One that most sentient Americans, from janitors to economics professors often ponder. AP cites areas of agreement on part of the unemployment issue. First, many Boomers, including the Prudent Man, found themselves adrift in 2008 and beyond after being cut loose from their longtime employment. And second, “some employment-intensive industries that suffered the most during the Great Recession, especially in manufacturing and construction, have yet to fully rebound.”

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So why, exactly, are these two things true? In the case of chronically unemployed Boomers, it’s simply a matter of corporate budgets, corporate cynicism, and a silent conspiracy:

  • In order to survive after the initial 2007-2010 economic disaster, most companies had to get leaner and meaner than ever before. Employees and their benefits packages are a major expense, and that’s where much of the initial and continuing belt-tightening has taken place and still is.
  • When making budget—and personnel—cuts, companies, as has increasingly been the fashion since roughly the 1970s, focused not on the most recently hired and least experienced workers, which was once the norm; but instead went for the dollars by axing senior employees who had finally reached their peak earning years and hoped to earn enough “surplus” income to aid in their eventual retirement. Strictly looking at the numbers, many companies decided well-paid Boomer employees were low-hanging fruit when it came to simple dollar cost savings, and gave these employees the boot, figuring later on to hire inexperienced youngsters at substantially lower salaries and with considerably reduced benefits packages.
  • And this was the silent conspiracy: the quiet but almost universal recognition early on that retaining too many older, more experienced employees—or even hiring newer, senior employees for key management slots—would hamper bottom lines that would not be improving any time soon. Thus, a silent, illegal epidemic of age-discrimination set in, leading perhaps a majority of job-seeking Boomers to finally abandon the search for a new job. Once HR and/or management at a hiring company ascertained, by whatever means, that an applicant was a highly experienced Boomer, that resume most often ended up in the circular file. No reason ever given. But it’s pretty clear what the reason was.

The case of construction workers is perhaps more obvious but no less pernicious. New housing construction, a major source of employment for trade-skilled and unskilled labor alike, has never really recovered in spite of the monthly and quarterly happy talk we get in the media. The real reason for continued high unemployment in this sector, however, is linked in major part to the continuing inability of trade-up homebuyers and new homebuyers to get mortgages. And with no mortgage, no house.

But no matter, as far as the cockeyed optimist(s) who authored the AP article are concerned.

‘We know that the reason unemployment is so high right now is pretty simple: employers haven’t seen demand for their stuff pick up in a way that would require them to bring on more workers, put that factory back on line, get more people to work,’ said Heidi Shierholz, chief economist for the Economic Policy Institute, a labor-oriented Washington think-tank.

‘It’s going to be this way for a while. We’re in a long slog,’ Shierholz said, noting that the recession of 2007-2009 was the harshest downturn since the 1930s Great Depression.

‘We really are in a recovery. Things are getting better,’ Shierholz added. ‘It is agonizingly slow. But we are going in the right direction.’

What neither AP nor these self-styled “experts” see is that elephant in the room we mentioned earlier. Whether anyone cares to acknowledge it or not, Obamacare is the elephant in the room when it comes to the stagnant unemployment rate.

READ ALSO: Have all the lost jobs finally returned?

Sure, the official “rate” has been going down. But this is a phony number that doesn’t take into account those who have lost unemployment benefits, those who’ve dropped out and stopped looking for work because it’s a waste of time, and those who, out of economic desperation, are underemployed or part time employed, hoping to stave off personal economic disaster while awaiting the improvement in job availability that will never come.

Because: Obamacare.

Off-the-record, almost any business owners in the country, large or small, will readily acknowledge that they’ve kept a lid on hiring for years, particularly after Obamacare was signed into law.

Far more responsible and cautious than the political hacks who crammed this abominable legislation down unwilling American throats, these CEOs and CFOs recognize Obamacare for what it is: a largely indefinable future liability that will grow unpredictably as a major cost factor in hiring or retaining employees.

Until and unless companies can grasp how much, both today and tomorrow, implementing Obamacare in their workforces will cost them, they have proved almost absolutely unwilling to move ahead on the hiring front. If they have no clue as to the additional cost per employee, it makes things almost impossible to predict in their respective marketplaces.

Pricing of goods, transportation, raw materials costs, you name it—all reflect the current price of labor with a provision for tomorrow’s costs as well. But if something is preventing you from being able to predict these costs with reasonable accuracy, you’re taking a big chance by increasing your labor costs with new hires whose individual cost you have no way of estimating.

So the companies take a pass on new hiring and will continue to do so. Why? Because the Administration, in order to dodge the electoral consequences of its own arrogance and stupidity, keeps kicking the can of corporate and small business Obamacare implementation down the road after each election.

Corporate implementation of Obamacare was supposed to begin this year. But now it doesn’t begin until next year. Because of the November elections. Businesses and individuals will still get clobbered. Just in 2015 now, not 2014. Surely all involved actually know this and won’t be fooled into voting Democrat again this November. But you never know.

Business rightly fears the completely unknown. Unknowns make it impossible to plan future investments, R&D expenses and staffing levels. But each time this Administration, with the complicity of the Democrat-controlled Senate, delays providing certainty on the hydra-headed health monster they’ve created, they force businesses to delay hiring decisions again and again.

Information such as that contained in today’s AP report is valid as far as it goes. But what every article purporting to dissect the unemployment situation in the U.S. consistently fails to assess is the silent reason why substantial new hiring—not to mention salary increases to any meaningful level—remain on seemingly perpetual hold. And that silent reason is the looming ghost of Obamacare costs, bureaucracy and implementation on a corporate and national level.

Companies need clarity on this issue and they need it now. But in Washington today, socialist politics, not the public welfare, drives what gets done or doesn’t. So far, it’s been inconvenient for Democrats to face squarely the economic disaster they’ve created with Obamacare. But the result of this political cowardice has been an almost unprecedented stagnation in both hiring and in meaningful corporate growth.

It’s time to acknowledge that, while perniciously high unemployment and an unusually low labor participation rate are the tip of an economic iceberg. The hidden cause for our continuing economic stagnation is Obamacare pure and simple.

Perhaps for some, this is an inconvenient truth. But the truth it is, and it’s time to put it on the table and deal with it. Hopefully, that will begin to happen this fall, but only time will really tell.

*Cartoon by Branco, courtesy of LegalInsurrection: http://legalinsurrection.com/2013/10/branco-cartoon-delay-and-conquer/

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Terry Ponick
Biographical Note: Dateline Award-winning music and theater critic for The Connection Newspapers and the Reston-Fairfax Times, Terry was the music critic for the Washington Times print edition (1994-2010) and online Communities (2010-2014). Since 2014, he has been the Business and Entertainment Editor for Communities Digital News (CDN). A former stockbroker and a writer and editor with many interests, he served as editor under contract from the White House Office of Science and Technology Policy (OSTP) and continues to write on science and business topics. He is a graduate of Georgetown University (BA, MA) and the University of South Carolina where he was awarded a Ph.D. in English and American Literature and co-founded one of the earliest Writing Labs in the country. Twitter: @terryp17