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Home Publications Blogs Beat the Press Romney and Robert Samuelson Are Wrong: Employers Are Not Reluctant to Hire

Romney and Robert Samuelson Are Wrong: Employers Are Not Reluctant to Hire

Monday, 10 September 2012 04:34

The Romney campaign has picked up a theme pushed by Republicans ever since President Obama entered the White House, employers are reluctant to hire because they are scared by regulations and taxes. Robert Samuelson picks up this line in his column assessing whether the economy can actually create 12 million jobs over the next 4 years.

There is a simple way to prove that employers have no reluctance to hire. We can look at average weekly hours. If employers are seeing increased demand but don't want to hire because they fear an attack from the regulation monster or higher taxes, then they would work their existing work force more hours. That one should be pretty painless even for our fearful job creators. After all, do we really think that they would turn away customers from their stores, restaurants, and factories rather than have workers put in a few extra hours each week?

Here's what the Bureau of Labor Statistics tells us about weekly hours:

    Average Weekly Hours: All Employees

hours-09-2012 Source Bureau of Labor Statistics.

In short, there is no story of reluctant employers, the problem is inadequate demand pure and simple. If employers saw more demand, they would likely hire more workers.

There is one other point worth mentioning in reference to Samuelson's evaluation of the 12 million jobs claim. Samuelson is a skeptic, noting that the economy has rarely added 3 million jobs a year in the past. That is not terribly relevant because the labor force was smaller in the past. The question is the rate of growth.

The economy did add 12 million jobs from 1996 to 2000, at a time when the labor force was almost 20 percent smaller than it is today. The 12 million jobs number is a very reasonable target. There is of course no guarantee that the economy will add this many jobs, but if we are to get back close to full employment by 2016 (8 years after the beginning of the recession) this sort of job growth will be necessary.

Addendum: The title of the graph was corrected. Also, the story here is that hours are still somewhat below their pre-recession average. That was presumably a period in which employees were not reluctant to hire because they feared taxes, regulation or whatever else. If the Romney-Samuelson story were true then hours should be above the pre-recession average. The idea is that employers would otherwise be hiring, but because of their fears about the future, they are opting not to.

Comments (7)Add Comment
written by foosion, September 10, 2012 5:18
The caption above the chart is "Unemployment Rate for College Grads: Age 25 and Over" but the chart seems to be hours worked.

The chart shows a rather steady increase in weekly hours worked for all employees from mid 2009 to 03/12, with a recent leveling off, yet the text suggests that due to inadequate demand hours worked have not increased.
Unemployed Americans Deserve the Same Certainty of Spending as Private Military Contractors
written by Last Mover, September 10, 2012 6:45
... employers are reluctant to hire because they are scared by regulations and taxes.

Taken literally, this also implies employers are eager to fire as well even in the face of claimed existing sufficient demand, because they are "scared" by regulations and taxes associated with existing employees going forward (instead of working employees less hours as Baker would say due to less demand.)

There's a critical difference between between certainty and uncertainty regarding regulations and taxes. Uncertainty means the risks are unknown because the direction of change is unknown, while certainty means the risks are predictable whatever quantitative values involved. (For example a claim that high taxes are killing jobs is a claim about certainty, not uncertainty.)

Take the cost-plus contracts awarded to private military contractors that Romney wants to preserve as needed government stimulus spending to create jobs. That's rock solid certainty if it ever was, so contractors don't hesitate to hire for the confirmed demand, just as they must fire if cuts are made.

In contrast, it is primarily the Republicans who have intentionally created uncertainty for the private sector in general (beyond military contractors) by intentionally derailing every effort to fill the huge gap in private sector spending with targeted government stimulus spending (or in reverse, created the certainty of killing any and all stimulus forever).

The only "certainty or uncertainty" in question is about stimulus spending and demand, not unknown changes in regulations and taxes which are fairly certain (most electoral promises are lies). Businesses actually are quite certain for the forseeable future that no sufficient demand to justify hiring is forthcoming either from the private or public sector.
Range - One hour per week
written by Ron Alley, September 10, 2012 6:45
The range on the ordinate of the graph (33.75 to 34.75) is one hour per week. Hard to convince me that that is beyond statistical noise.
It's all relative (and irrelevant?)
written by David, September 10, 2012 6:54
Foosion, relative to the pre-recession levels, avg work hours/wk have not risen, in fact it's below "business as usual". The drop in Fall 2008 was due to the freefall in demand. Sure there's uncertainty: about demand and whether customers will come in. It's most obvious in small retail shops, but even at Sears, Best Buy (if Samuelson reads the stock pages, he must be blind).

No, the libertarian monster refuses to face the reality that it has failed, economically and ethically.
Looked up the data ...
written by David, September 10, 2012 7:11
If you compare the BLS data by month, in most months the variaton was less than a few tenths of an hour, averaged over all sectors. Dean's choice of scale gives the wrong impression that the variation is statistically significant.
written by foosion, September 10, 2012 7:29
David, the problem is Dean's chart does not support his argument regarding Obama.

The Republican claim is that business has not hired since Obama took office due to his kenyan muslim socialist policies. The claim is clearly wrong, as his policies are mainstream Republican circa 1990, government employment has decreased sharply, tax rates are down, profits and margins are up, etc. Lack of demand is clearly the real problem.

However, Dean points to the failure of average hours worked to increase as evidence that lack of demand is the problem. His chart shows an increase in average hours during the Obama years.

In other words, Dean is right and the Rs are wrong, but not for the reason Dean cites in this post.

If Dean's argument is that an increase from 33.75 to 34.5 is meaningless, he could have been a lot clearer, using a different scale and showing longer term data.
written by fuller schmidt, September 10, 2012 4:19
Perhaps checking a graph of Capacity Utilization would help with some of the consternation in this thread.

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About Beat the Press

Dean Baker is co-director of the Center for Economic and Policy Research in Washington, D.C. He is the author of several books, his latest being The End of Loser Liberalism: Making Markets Progressive. Read more about Dean.