As a U.S. startup or small business, when you hire your first employee, among other things: (1) you start having to pay employer-related payroll taxes to federal, state and possibly local governments; (2) you need to hire a payroll service to handle the myriad reports to be filed with the taxing authorities; (3) you can get dinged for unemployment insurance claims (the point of this piece); (4) you need to take out a workers' comp insurance policy; (5) you are at risk for claims of wrongful discharge; (6) ditto for claims of sexual harassment; (7) ditto for claims of illegal discrimination; (8) you can face waiting-time penalties if you are slow to meet payroll; (9) you can face the so-called 100% penalty if you fail to remit withheld payroll taxes to the government; (10) you must pay at least a minimum wage for services rendered; (11) you must pay overtime for work in excess of 8 hours per day or 40 hours per week; (12) you must post some bureaucratic notices of workplace rights about your premises; (13) you may have to fund your employee's retirement along with your own; (14) you may have to pay for your employee's rehab if it is deemed a disability; (15) you can be vicariously liable for the acts of your employee that damage others (e.g., if he runs someone over while driving on company business); and (16) add here any of many other possible oddball consequences, such as possibly increasing your business license tax, requiring you to register as a foreign corporation (if you are such) in a state other than your state of domicile, etc.
No doubt you can others. While there may good and valid reasons for each of these requirements under law, is it a wonder (when you consider their cumulative impact) that startups will typically have x reasons of their own "not to hire," at least early in the company's history?
This is another example of perverse, unintended consequences of "pro-worker" initiatives biting their intended beneficiaries in the hindquarters. Take a look at France for the endgame to that: between generous benefits and legally guaranteed protection from firing that makes Japanese salaryman positions look unstable, the economy is structurally incapable of employing a huge percentage of the work force. The young and immigrants, who are the worst affected by this (not surprising: the lowest skilled/lowest educated/poorest always catch the worst of every systemic economic issue), have little to do but sit on the dole or riot, and few prospects for ever doing anything else.
My impression is that similar issues cause the massive underemployment of the non-salaryman strata of Japanese twenty-somethings. Many of the freeters (people who bounce from part-time job to part-time job) are cut out for entry level work, but hiring someone is a lot like marrying them, so if you don't have the appropriate credential and a resume which looks like exactly what the company wants, they generally pass.
On the other hand, the Danes have a system where the workforce is extremely mobile, precisely because every worker is guaranteed up to four years of unemployment benefits. Employers are under no obligation to retain employees, because there's a great safety net.
If we're going to talk about unintended consequences, we need to consider all sides: what is the unintended consequence of a system that provides no assurances to workers during economic downturns? I suspect the downside is quite harsh.
You have a curious definition of "all sides" in which the solution space appears to be "Impose European-style levels of benefits" XOR "Unemployed people starve in the snow." I am missing anybody here seriously proposing the second option.
I suspect the downside to having employment-at-will, very modest unemployment benefits, and a liquid labor market exists. I also suspect that it can be measured in terms of objectively verifiable criteria, and compared with the alternatives. For example, I suspect that I can look in a US newspaper for a count of the number of cars burned last night by immigrants rioting over lack of economic opportunity. It will take me a whole lot of searching, because few newspapers publish articles titled "BREAKING! No riot today, either!"
Then I could look at the same number in a French newspaper. (100 a day on quiet days, spiking to over a thousand on New Years or during periods of mass unrest. You might think I'm exaggerating. http://www.time.com/time/world/article/0,8599,1869392,00.htm... )
Alternatively, if counting riots seems a little messy, I could look at unemployment statistics for those under twenty five. In the United States, for youths at large, it is about 11~12% right now. In France, it is over 20 -- down a bit from a few years ago when it hit 25%. For socially disadvantaged groups in America, for example black males without a high school degree, it is about 48%. For similarly situated folks in France (for example, uneducated immigrants), unemployment is close to total.]
You have valid points, but you also must consider how different France is from the U.S. When their unions strike over compensation, for example, they close down roads and burn things. Our unions strike by marching in circles with signs. Most of the immigrants you speak of live in the equivalent to housing projects. America has housing projects, but much, much fewer. It's something the French have embraced, to the detriment of their society, because it keeps their immigrant population from integrating. America prides itself on it's diversity and France prides itself on it's "Frenchness." I think you need to consider all of these things when talking about the reasons the young, unemployed French riot.
One more thing. I don't know about the ethnic or age breakdown, but right now French and American unemployment percentages are same. The difference is the French unemployed have healthcare and other social programs, so they're better off, in many instances, than Americans.
Well, yes and no. The farmers will do that, year. Metro workers often "strike" by running a normal service but refusing to collect fares. That keeps the public on-side.
A friend of mine was at the last Santacon in Paris, they were mistaken for striking workers...
Incidentally, the banlieus of Paris are worse than "the ghetto" of any American city. Except maybe Detroit.
I don't assume that the options are mutually exclusive. That said, I'm pragmatic enough to know that someone has to pay for a system like the Danes'. It comes at the expense of high taxes for all.
But if we're talking about curious, all-or-nothing thinking, I have to wonder why you're so obsessively focused on the French? A quick Google search tells me that the unemployment rate in Denmark (horrible
social welfare state and all), is only around 5%. Perhaps the problems in France are specific to France?
I generally assume Americans/Europeans are comparatively well-informed on the economies and present socio/political situations of America/Europe. I could have used Japan as the main example, but if I alluded to something like "90% of the foreign population from my town is either unemployed or has emigrated in response to a government policy which paid foreigners to leave" I'd probably have to give you the back story on why central Japan has lots of Peruvians/Brazilians and their social status, then give you a rundown on what the difference between a seishain and a hakkenshain is, then discuss the changing norms about lifetime employment, then explain why the Japanese benefit system makes it almost impossible to land a seishain job unless you look like the perfect applicant, and finally get to the actual numbers which demonstrate my point.
Which would be difficult because I have about five minutes left on my lunch break and then it is back to the web programming salt mines.
Do you see the discrepancy in your recognising that you need to give all sorts of specific details as to the background and circumstances leading to the immigrant employment problems in Japan, but you're willing to make broad generalisations about France? In truth the two situations are likely as mind-boggingly complicated as each other.
Absolutely. The ideal system would combine high worker mobility (at will employment, no non-compete agreements, etc) with a generous safety net to minimize the cost of losing one's job.
It seems like the issue here is the way unemployment is funded.
That is the problem we have in the UK. There is a whole welfare based subculture, often referred to as "chavs".
Personally I would like to see entitlement to the dole based on education... The taxpayer has paid to educate everyone up to the age of 18. If someone throws away that opportunity and leaves school without qualifications they're unemployable, why should the taxpayer support them in that case?
Well, just maybe because when they are under 18 they are deemed a "child" and the thing about "children" is they don't always act in their long term best interests. They may have been raised badly. They may have done badly at primary school and been left behind by the education system. Yes, some people are feckless scroungers. But punishing them for that is leaving things too late. We need, as a society, to find ways to help people become productive members of our society, wherever they start from.
Give them an opportunity to catch up. If they don't have a high school diploma, make them get one as a condition for getting benefits. Be flexible and offer night classes for people who work part time. I agree that punishing people whom either made bad choices or found themselves in a bad situation as kids is not productive, but it is equally unproductive to leave them in the situation they are.
The alternative is punishing those who made good choices, by taxing them to pay for the others. And it's not like those choices are even hard to make: ask any 10-year-old if he thinks he might need his education to get a job. People know this. But they know they get a free ride too. That's got to change.
If I had to chose between my tax money going towards letting people sit at home and watch day time TV or letting them get an education, I'll happily choose the latter every time.
Secondly, we're talking about 16 year old kids here. If there is one thing that is pretty much universally true about teenagers it's that they're not very smart. Ask your avg. 16-18 year old high school dropout about the connection between education and jobs and they'll no doubt give you a long list of people who did perfectly fine without a high school diploma. They turn on their TVs and see people making millions without any education at all. Those are their role models. Then they look out their window and see college educated people just as unemployed as they are. Many kids don't see the connection between education as jobs. Telling people who later in life realized they might have made the wrong choice "hey you had a chance when you where a kid, too bad if you missed it", is not doing anyone any favours.
The "safety net" should NOT be generous or minimize the "cost of losing one's job"; it should do no more than assure that losing a job is not a catastrophe; it should not be made less than seriously uncomfortable.
It depends on the reasons for the safety net--- one reason is a simple humanitarian one (don't want people homeless, etc.), for which the bare minimum suffices, but another reason is as an automatic business-cycle smoother, in which case you want reasonably generous unemployment benefits: http://www.nber.org/papers/w4750
what is the unintended consequence of a system that provides no assurances to workers during economic downturns?
It exacerbates the business cycle for very obvious reasons, and it also slows economic growth as it results in more conservative investment, and lower spending on the parts of both businesses and consumers alike.
The real world numbers seem to bear out that unemployment compensation of some sort is a good thing.
The real world numbers also seem to bear out that if an undue portion of that compensation must come from the former employer specifically, that it creates some unfortunate disincentives towards hiring in the first place, which reduce (or in extreme cases eliminate) the benefits.
In short, Patio1 is right in thinking that the French system has some drawbacks... but his claim that the French system is some sort of inevitable end result of worker rights is utter and complete rubbish. The problem is nothing to do with workers rights, and everything to do with the specific implementation.
Actually, a system that provides "assurances to workers" during a downturn might exacerbate the business cycle.
(This is the recalculation theory of business cycles.)
A recession is caused when resources are systematically devoted to suboptimal purposes. For instance, we built too many houses and we just discovered they aren't worth much.
A laid off construction worker, auto worker or buggy whip maker may think he can still get his old job back. Generous unemployment insurance allows him to wait around for a long time, hoping to get back a job similar to his old job. However, absent unemployment insurance, he would be forced to take whatever he could get, thereby shortening the recession.
(Note: this doesn't dispute your theory of more conservative investment/spending decisions, it's just another countervailing factor that must enter into the cost/benefit calculation.)
Generous unemployment insurance allows him to wait around for a long time, hoping to get back a job similar to his old job. However, absent unemployment insurance, he would be forced to take whatever he could get, thereby shortening the recession.
This isn't a cut and dry argument either. That said, it's the reason that some unemployment compensation packages include or are dependent on job placement services and/or retraining efforts.
If you simply provide people with moderate passive income, the likelihood that they'll use it to update their skill set and change the direction of their career depends on a whole host of variables (satisfaction at previous jobs, age, industry, amount and type of education, union membership, other cultural factors.)
As such, I'd agree that for some people, income without retraining or mandatory placement services has a deleterious effect, but this is in no way a universal phenomena.
The detroit auto worker is pretty much the poster child for the problem you cite. This is because they tend to be on the wrong side of every variable I mentioned (low satisfaction, high age, salaried employment, a contract industry, relatively low formal education, higher vocational education, union members, and likely to be part of a generation that feels they are "owed" jobs.)
That said, their existence doesn't demonstrate that the programs are an overall drain, because they aren't representative of the average unemployed worker. They're skewed negatively in every dimension that matters.
Their existence does, however, reinforce the value of retraining services and mandatory placement efforts as part of a maximally effective unemployment compensation program.
I wasn't trying to imply that unemployment is an overall drain, I was simply pointing out a countervailing factor. Overall, I really don't know how these various factors add up. I imagine the result varies widely from place to place, and it's a very difficult empirical question to answer.
In fact, ultimately I suspect that the variation from place to place is the exact opposite of what would be optimal.
As you say, Detroit auto workers are on the wrong side of every variable. I expect that they also vote for generous benefits. In contrast, a place with a hard working "get off your ass and get a damn job" culture will probably vote for stingy unemployment benefits even though generous benefits would not be (locally) harmful.
It's a bit of a flaw with a democratic system.
However, a proposed solution which addresses both aggregate demand and disincentives would be to make unemployment benefits as unpleasant as possible while still providing monetary benefits. For instance, we could create a social stigma around receiving unemployment benefits. Or we might require unemployed people to submit to weekly adversarial interviews about their job search at 3AM in a cold/hot building with no chairs.
The problem in France is that you CANNOT fire people without an excellent reason. It's just illegal. You may be forced to hire back the person or give a totally ridiculous amount of money.
There is however up to six months of probation during which you may let the person go for no real reason. It can unfortunately be a bit more complex than that and it's better to argument well when you fire even during the probation...
As for employment compensation, it's around 7% of what you pay to your employees. When fired people have one year of compensation from the public unemployment insurance.
I however think it's good that people don't end up with "nothing" when they lose their job, whatever the reason.
Our real problem however is not here I think, the real problem is that when I want my engineer to receive 78 €, I have to pay 178 € including all taxes. On these 78 €, the engineer will pay around 20% - 30 % of income tax (up to 50% if he really makes a lot of money) and we have a 20% VAT on just about everything.
I am pretty sure you are mistaken about firings being illegal, having witnessed firings. Yes, in France.
Employment is certainly not "at will", but employers can fire for the usual reasons: economic causes, performance problems, incidents, the last one causing the employee to lose the safety net. I have witnessed mass engineer layoffs at a startup for economic reasons, and the employer was not on the hook for much. I have witnessed firing "for personal reasons" which can include differences about work tools or methodology. The ridiculous amount of money you cite is not huge at all, 20% of monthly salary for each year of work at the company (5 year with the company = one month of compensation).
The employee can contest the firing at the French equivalent of the work board, but it's usually cut and dried.
If that is what you are actually complaining about, about employment not being "at will", I do not have a good answer, other than it being a cultural difference that turns irrelevant in practice.
I am wondering what is going on around here, relative to France. Both in HN and Times comments I have witnessed only ignorance (not a single knowledgeable comment) on French employment, laws, and worse, attitudes. It's not a worker's paradise, and nobody feels unnaturally entitled to their job.
About the overhead, yeah, the patronal taxes suck badly.
The problem in France is that you CANNOT fire people without an excellent reason
The key point is without excellent reasons
The reasons you gave (economic causes, performances, etc.) are valid but are clearly defined by the law.
I'm sure you've witnessed people being fired from startups, but I'm also quite certain that these people could have gained more in going to court ("conseil de prud'hommes")
There's a new way of breaking a contract when both parts agree to discontinue the business relationship, but it generally involves negotiating a certain amount of money (again).
The amount of compensation for a lay off you're talking about is the legal minimum. It's called "indemnité légale". On top of that there is the "indémnité conventionnelle" which is defined by the "convention collective" you probably know about.
When I talked about insane amount of money it's when you're not able to give a good reason for the lay off. In which case giving one year of income isn't rare.
When you want to fire someone for "insuffisance professionelle" (which is "inability to perform "), you need to back that up with extremely solid proof. When you want to fire someone for "faute" (fault), you need to back that up. You need proof. And even when you have proof, you generally end up paying more if the person sues you for abusive lay off.
The problem is that the system is extremely rigid. When you have valid reasons for firing someone, even for fault, you need to be extremely rigorous in every step. If ever you did something wrong (forgot to send the warning letter, didn't formalize the proof well, there's an insane list of what you must do...), you might be force to reintegrate the person into your team.
I'd also want to assert (again) that I find normal that employees are protected and cannot be fired at will. Abusive employers aren't rare.
And last but not least I'd like to say that I never had to consider to let go someone in my life because I work with the most talented people a boss could dream to have, and I truly hope I'll never need to call my lawyer to assist me in the unpleasant task of firing someone.
Instead of being fired or laid off, employees are put into "Milton" type roles where they are made to feel useless, or intimidated into quitting/committing suicide.
There's a line between workers' rights & social safety nets and making the employment market extremely inefficient. I think it's fair to use public funds to retrain employees who have spent years contributing to society, or even to provide them a temporary income so they don't have to worry for their family's future. Still, people generally want to do useful work, and keeping unproductive workers employed hurts them, other candidates, and the nation as a whole.
Shouldn't you be able to buy unemployment insurance privately? (Okay, I know that may be a market for lemons because of the information asymmetries.. And you can't let people starve who haven't bought their insurance.)
Yes, private unemployment insurance. I don't know what the excuse was (this happened a long time ago), but the effect is obvious (governments are the only ones that offer it).
You can buy private disability insurance while the government offers the same thing through the Social Security Administration, but not private unemployment insurance in any form....
Your solution is what? Abolish unemployment benefits? Fund them from general revenue instead of a targetted tax? I'm honestly curious. Your use of scare quotes in the first sentence tells me you're a typical political troll, but the rest of your post seems thoughtful. What's the fix here, or are you just trying to score a quick point?
While it smacks of communism to some, intuitively it makes more sense to pay the unemployed to do something, particularly if it builds infrastructure or trains workers in new skills.
intuitively yes I agree with you, however, the problem is that the building of infrastructure or worker training is done in the abscence of market signals. Hence the likelihood of a bridge to nowhere or an army of trained workers in a useless field is high.
Certainly projects like the Hoover dam or interstate system have many positive externalities that last a long time - but it's not always easy to come up with these projects, and the labour involved is only a small percentage.
When you divert productive capacity of the economy to unproductive use (such as building an unnecessary bridge) then society as a whole pays because of the diversion of resources (including labour and capital). The problem becomes more acute, because the 'shovel ready' projects are generally uneconomic ones - in many cases, if there was a positive return to be made from undertaking a certain activity, then the private sector will already have undertaken it.
I think the best use for the paid-unemployed is in things that are labour intensive and help with society. Helping clean houses for new mothers with small children and old people would be one thing, because these activities are economically unviable and you wouldn't be putting anyone else out of work.
In my opinion most in the US are far too concerned about running public infrastructure plans at a profit. The example that comes to my mind most readily is mass transit.
Living in Taiwan, I've seen absolutely amazing changes over a relatively short amount of time. In 1997, Taipei city was hellish. literally millions of people drove their scooters to and from work every day, traffic was terrible, commutes were slow and air was so bad that it was common to see people walking on the sidewalk wearing facemasks.
Now, there's a fairly extensive subway system that links to both a traditional rail system and a high-speed rail (top speed 300km/h) that goes to every major city on the island. In Taipei, commute times from one side of the city to the other dropped from 3 hours to less than one. People don't wear masks to walk on the sidewalks anymore, either. The system has been a major improvement economically, environmentally and in terms of quality of life. In fact, I don't think it's much of a stretch to say that subway system saved the city.
However, it was an investment. Nobody expected fares to pay the costs of constructing the subway directly. The government spent the equivalent of over 30 billion US dollars on it and while it was undoubtedly a good investment, it was one that only the public sector would undertake.
When you divert productive capacity of the economy to unproductive use (such as building an unnecessary bridge) then society as a whole pays because of the diversion of resources (including labour and capital).
Do you really think the average unemployed American is doing something any more productive than building an unnecessary bridge?
Also, these projects happen anyways, since in the absence of a US-level program to allocate underutilized human capital our representatives fight like hell to get funding for ridiculous projects in their states, for the sole purpose of providing employment. I'd personally prefer if these projects were devised and approved out in the open by a group responsible for their choices, rather than slipped into important budget bills at the last minute and rammed through Congress because nobody can do anything about it.
Useless bridges are of NEGATIVE value. They use resources (which raises the market price of resources for actual, useful projects), take up funding which comes from tax dollars of firms doing useful work, they need to be maintained, and they eventually need to be decommissioned.
So yes, the average unemployed American watching the grass grow is doing something more productive.
No. That's simply not true by any macroeconomic definition of "value". You're making the classic (and wrong) assumption taht there is only a certain amount of "stuff" available, and spending it in one place means that you can't use it elsewhere. That works for checkbooks. It doesn't work for economies.
There is a finite amount of funding in the federal "checkbook"/budget for a given year. Spending that money means that it can't be used on projects that will pay much better dividends in the future, even if it just means paying off a debt, reducing future interest payments.
A useless bridge will be a drain on the budget in subsequent years for little economic payoff in terms of improved productivity. It's an extremely inefficient allocation of resources, to the point that it's very likely that it's worse than almost all alternatives that don't involve building something.
So what happens to those dollars you pay the bridge builders? Do they just turn into nothing? Or do they use them to pay their mortgages, and shop, and eat? What happens when those bridge builders are not paid for that bridge? That's right, their banks and local stores see less revenue.
Look, just read a textbook or two on macroeconomics. This isn't a new idea. You're just uninformed, sorry.
Yes, I'm well aware of trickle down effects and how it would feed money from the federal budget back into the economy. Yes I've read a couple macro textbooks and even taken more than a few college macro courses in my time, you can cut the condescension and stop appealing to authority, thanks.
There are just always better things to do with that money than making something useless. There are lots of projects that could actually make business more efficient and attractive to conduct in the US.
But failing finding something useful to do with it, they could produce nothing and we'd still be better off. What you're talking about with building a useless bridge is a terribly inefficient form of welfare.
Think about it this way: By having those bridge builders watch the grass grow and sending them the money you would have paid them as welfare, sending the suppliers the money you would have paid them, you get the trickle-down effects you mentioned without the future cost obligations that come with actually producing a bridge to the middle of a lake.
So my original point stands. It's worse to produce something completely useless than it is to not produce anything at all.
The value of unemployment is in the desperation it creates in people. That desperation inspires them to try new, risky things that they would never have the guts to do otherwise.
Would T.J. Watson have had the motivation to found IBM had he not been fired from NCR and indicted by the government for blatant anti-trust schemes? Would Bill Hewlett and Dave Packard have founded HP if it hadn't been the midst of the Great Depression with few jobs to be found? How about Steve Jobs and Steve Wozniak - HP nearly killed Apple Computer in the cradle, because Woz didn't want to leave his employer.
The opportunity cost of employment isn't just a bunch of people sitting on their ass. It's a bunch of people sitting on their asses getting increasingly worried about where their next meal is going to come from. Eventually, some of them do something about it. Big risks are usually scary - it often takes some equally scary big shifts in your life to push you into taking them.
None of the people you site were in anything resembling a desperate situation. HP was founded by 2 college fellowship students. TJ Watson was the frontman for NCR before moving to lead IBM. And Woz was so comfortable at HP that he was reluctant to leave to start a company. All these people were financially well-heeled. They all took risks starting a company, but not out of financial desperation.
The one person you didn't mention that even remotely fits the profile of desperate entrepreneur is Steve Jobs, which you failed to include.
Working against that is the I gather widely held opinion that a lot of people don't get totally serious about getting a job until the unemployment benefits run out. Of course, when you have a secular horrible employment market like today's you've got a different problem.
You've got to be careful here, set up the incentives wrong and you get an unsustainable European welfare state (particularly for us, given that we provide so much of the world's security).
One other issue WRT a situation like today's: you've got to be careful that governments don't go bankrupt when revenues crater and social payments skyrocket due to a very nasty recession/depression.
The last (and, thank God, only) time I was laid off, I was serious about getting a job even before my severance pay ran out. Damn good thing, too, because the search took me ten months.
Personally I find it more of an example of how screwed up the US government is at this point. They seem to ruin everything they try to do. A lot of other first world countries have reasonable protections for workers without killing the "little guy".
I also don't buy your analysis of France. Large amounts of immigration always create a lot of unrest (just look at the otherwise pretty progressive Swedish).
This covers one big point that a lot of 'workplace rule making' types never quite understand. Most policies designed to protect people from losing their jobs actually increase either the chance they will lose their job, or their chance of getting another job. If there are penalties for firing an employee, with an associated 'trial period', then the employee stands a greater chance of getting fired before that period is up, even if there was a chance that any issues could have been worked out.
If an employer knows they may lose money from claims of unfair firing, then they will resist hiring employees until they have sufficient funds to cover the cost of losing someone.
Anecdote in point : a member of my family runs a business. A new hire didn't work out, and after counselling them several times, they decided the person had to go. They waited until after Christmas, fired the employee, who said that they understood the reasons. The former employee found representation, came back and successfully won compensation for an unfair dismissal. The reason was that some paperwork had not been completed correctly during the firing process. The resulting legal costs and compensation meant that the position will remain unfilled for several months until the balance sheet position is restored.
It's the same law of unintended consequences that means rent controlled apartments actually decrease housing affordability in cities (apart from the lucky few). Employment policies like this decrease employment (apart from the lucky few). In both cases the results are the direct opposite for what they are intended.
In terms of a social policy : governments should cover minimum wages, working conditions and other safety issues. Compensation for unfair dismissal should be capped regardless of salary and paid out of a central fund taken from company income taxes.
> In terms of a social policy : governments should cover minimum wages, working conditions and other safety issues. Compensation for unfair dismissal should be capped regardless of salary and paid out of a central fund taken from company income taxes.
I agree in general. But why have minimum wages? The same line of reasoning as the one against rent control applies here.
(As an example, Germany does not have a minimum wage for most industries. It has lots of other `employee protection', that needs to be removed, though.)
I have trouble believing your story (assuming it takes place in the states ...) - do you have any more details?
It's (thankfully) really hard to win an unfair dismissal suit since we're all 'at will' employees by default. You can fire someone because you don't like their shoes, don't like that they smoke, or even no reason at all (the handful of exceptions are 'protected categories', like race/religion).
No, it is not in the USA. I can't post any more details because I doubt the particular business would appreciate it being discussed online. However, I can assure you that it is very much true, right down to the employee being fired after the christmas break. The workplace in question closes down for two weeks after Christmas and the employee was kept on full pay, and dismissed upon their return to work. This was because nobody wants to fire someone just before Christmas, when their chances of getting a new job are slim.
In this country, you can't fire an employee for any reason other than non-performance of written job duties, and only after three written warnings, and a whole pile of other paperwork. It's easy to get this wrong, and then open yourself up to unfair dismissal actions. The union representatives actively look for these types of cases to prosecute.
"In this country, you can't fire an employee for any reason other than non-performance of written job duties, and only after three written warnings, and a whole pile of other paperwork. It's easy to get this wrong, and then open yourself up to unfair dismissal actions. The union representatives actively look for these types of cases to prosecute."
Right you are. I've worked in 3 states, and they all work that way, so I mistakenly generalized.
Some research suggests that it really varies state by state (even the states that are generally 'at will' each have different exceptions) - so caveat my statement as appropriate for your state.
You're confusing a few issues here. Your story highlights a problem with the law system in the US. Plenty of countries with more worker friendly labor laws deal with these situations without forcing people to defend themselves in court.
Maybe I'm just inexperienced, but can't you get around this with contract-to-hire? E.g., bring your prospective salesguy in for a 90-day contract, and if they cut the condiment of choice, keep them?
All true, but he'd talking about temp-to-hire (which I've done with success (well, I wasn't the owner, just the direct report of the employee). And the author of the article pretty clearly doesn't want to try to play the Permatemp game.
What is temp-to-hire?? I think the "temp" part is an extended probationary period, right? I don't think you could fire someone 45 days into a 60 day probationary period and then expect to not pay unemployment because of some agreement between the employee and employer. Does the concept of temp-to-hire exist as law or policy in any government agency?
Temp-to-hire is hiring a person for a temporary period say 3 - 6 months as a temp with the expectation that if everything works out they'll get a job offer at the end. If it doesn't then the contract is finished and they leave.
You can do this and there are some guidelines to follow to make sure the IRS doesn't classify the contractor as an employee. Some things to consider, how often are they in an office? How much do they control their daily activity? Are they their own boss or do you look over their shoulder? How do you pay them? Hourly? Salary? Per Project? Commission. You need to talk to an accountant, but the contractor relationship works for my company with zero employees. Everyone is 1099.
Probably was the case, and in some countries, still is the case. But workplace rule-makers know this and have been long trying to bring a contractor under a long term arrangement to be seen as an employee. The employers don't want it, the contractors don't want it, but the rule makers do, because they see this type of free-association employment as a way around the rules, rather than as a contract people willingly enter into.
I would gladly take such a position so long as the system seemed fair (e.g., seeing several long-term non-owner/management employees working there). The terms are spelled out clearly, and I'd rather work somewhere that I add value. If I can't make serious contributions in a couple months, then it's a bad deal for both me and the employer.
However, you might have trouble getting people with families to take the job, especially if they're relocating.
But that's not the proposition I posed, it was one with two offers from two different companies, only the starting terms were different. I noted in another reply that I'd done this as the direct report of an employee---and for that matter, for the one we hired that didn't work out at all (wanted to try to solve a programming problem by reinstalling NT!!!) it worked out very well (I hate firing people).
And, yeah, I'd forgotten about relocation, that makes it a non-starter for a lot of people and types of jobs.
And you know what that means? If you are a salaried worker this money is coming out of your pocket!
Think about that! Everybody should plan for occasional unemployment and there are two ways to go about it:
1. You save a year worth of expenses all by yourself, and live on that when hard times come.
2. You don't save, but the government saves for you (directly via payroll tax or indirectly via unemployment tax).
On the surface the two approaches are equal as far as worker is concerned. And yet! In the first case once you save enough you could stop saving and enjoy the surplus, but in the latter case you can't stop saving no matter how much you "saved" already.
Just one more benefit of working for yourself. Employment is such an archaic concept.
This post makes no sense. From Illinios State site http://www.ides.state.il.us/employer/uitax.asp Rates for 2010 are max 7.250% min 0.650% base $12,520 (you don't pay into unemployment insurance for wages over $12520/yr)
The rate you pay is based on past claims not to exceed 7.250%. How does he get $20000?
One successful claim against you changes the rate you pay for each employee. If your rate is set at 7.25% then for one employee you might pay 7.250% * $12,520=$907.70. You pay that much for EACH employee, e.g. 10 employees yields a bill for $9,077.
Except that the headline quite clearly tells us that the charge is 20x higher than that (it's a $20k reason not to hire "someone", not "$20k reason not to fire 21 people").
Surely the headline would lie for the purposes of exploiting partisan anger?
I think that if an employee is fired for cause, they should be forced to sell their organs to pay back the debt (and cost of finding a replacement worker) to their company. This would make small businesses more profitable, and it would be an incentive for people to work harder. It would also lower the cost of organs, allowing the ultra-rich business owners to get a replacement kidney AND own a vacation home.
What I meant to say is that I think business owners whine too much about money. If your business is not profitable, then it's time to do something else... not whine about how your fired employees shouldn't get unemployment benefits.
(I worked at a small company once, and all I ever heard about was how everything was too expensive. Health insurance is too expensive. Salary is too expensive. Taxes are too expensive. Guess what then, you aren't charging the clients enough.)
It might be convenient to paint all business owners as 'ultra-rich' but the majority of employment happens through smaller businesses, which generally aren't in a position to 'charge clients more money'. Ask someone who is getting a start-up off the ground why they can't just pay everyone more money.
And ask an average person who might work for you why they should subsidize your likely-to-fail startup with their own health.
It seems like the general consensus on HN is that The Government should subsidize startups and small-businesses Just Because, but that it's evil when the same government subsidizes the employee that didn't work quite hard enough and needs to eat food and live in a house while they look for a job they can do better. I don't get it.
(I bet if I wasn't so sarcastic when I made the organ-harvesting reference, I would have been upmodded!)
I can't speak for the rest of HN, but in my case I want no subsidies from the Government. What I want the goverment to do is get out of the way so I can get on with creating wealth for me, my family and any employees I hire. Having small companies grow into big ones is a net win for the government.
'subsidize your likely-to-fail startup with their own health'
Not sure how to respond to that statement, but all paid employees are offered to exchange their time and effort for cash compensation. It's up to those individuals if the exchange is worth it or not. If there is a chance of a detriment to their health, then they'd need to factor this in.
I think you'll find that your downvotes are because you disagree with the majority of readers of this site, not because of tone or sarcasm.
>"I think you'll find that your downvotes are because you disagree with the majority of readers of this site, not because of tone or sarcasm."
If he argued that the article author was wrong in a civil tone with a thoughtful manner, I doubt he would have downvotes. There are highly upvoted comments on this very thread that disagree with the article author.
This isn't reddit. Disagreement doesn't equal downvote.
Having unemployment benefits is not optional. Even 3rd world countries have this. However, I don't know that charging the companies directly for the unemployment is the best. Where I live workers pay an "unemployment insurance". The employer pays it, but it's part of the compensation like vacation etc. So when an employee is let go he draws from this insurance, the company is out of it.
If your business is not profitable, then it's time to do something else...
Yes, the best thing for the economy right now would be if all marginally profitable businesses tanked and their workers become unemployed. That'll fix things right up.
Errr, I haven't Read The Fine Article, but I know from nasty experience that if you're fired for cause in Massachusetts or Virginia you can't collect unemployment (both times this was relevant, my employer tried to claim that and failed miserably).
After reading the fine article: in Illinois, for cause == no unemployment, no taxes for the employer down the road.
No doubt you can others. While there may good and valid reasons for each of these requirements under law, is it a wonder (when you consider their cumulative impact) that startups will typically have x reasons of their own "not to hire," at least early in the company's history?