Some Reasons Why Firms Are Not Hiring

See What's Wrong With America's Job Engine?: Wary Companies Rely on Temps, Part-Timers, Hire Overseas by DAVID WESSEL, WSJ 7-27-11. Excerpts:

"That's largely because the economy is growing much too slowly to absorb the available work force, and industries that usually hire early in a recovery—construction and small businesses—were crippled by the credit bust.

Then there's the confidence factor. If employers were sure they could sell more, they would hire more. If they were less uncertain about everything from the durability of the recovery to the details of regulation, they would be more inclined to step up their hiring."

"Something else is going on, too, a phenomenon that predates the recession and has persisted through it: Changes in the way the job market works and how employers view labor.

Executives call it "structural cost reduction" or "flexibility." Northwestern University economist Robert Gordon calls it the rise of "the disposable worker," shorthand for a push by businesses to cut labor costs wherever they can, to an almost unprecedented degree.

Looking back at the percentage of Americans with jobs in the 1990s (rising) and the 2000s (falling), Princeton University economist Alan Krueger estimates that 70% of today's job shortage is simply cyclical, the result of a disappointing recovery from a deep recession. But he attributes 30% to changes in the job market that began a decade or more ago."

"In the most recent recession and the previous two—in 1990-91 and 2001—employers were quicker to lay off workers and cut their hours than in previous downturns. Many also were slower to rehire."

"Between the end of 2007 (when American employment peaked) and the end of 2009 (when it touched bottom), the U.S. economy's output of goods and services fell by 4.5%, but the number of workers fell by a much sharper 8.3%."

"At the worst of the 1980-82 recession, 1 in 5 of the unemployed were "temporary layoffs." In the recent recession, the proportion of temporary layoffs never exceeded 1 in 10. In part that's because fewer Americans work in factories, where production can be stopped and restarted; if a restaurant doesn't have enough customers, it goes out of business.

"When layoffs are temporary, subsequent recalls can take place quickly," say economists Erica Groshen and Simon Potter of the Federal Reserve Bank of New York. When layoffs are permanent, job recovery is slower, they say. If the employer wants to hire, there's the time-consuming chore of sifting through applications.

Corporate employers, their eyes firmly fixed on stock prices and the bottom line, prize flexibility over stability more than ever. The recession showed them they could do more with fewer workers than many of them previously realized."

"58% of employers expect to have more part-time, temporary or contract workers over the next five years and 21.5% more "outsourced or offshored" workers.

"Technology," McKinsey says, "makes it possible for companies to manage labor as a variable input. Using new resource-scheduling systems, they can staff workers only when needed—for a full day or a few hours."

Temporary-help agencies are playing an ever-larger role"

"Workers, in short, now can be hired "just in time.""

"Because they can hire temps almost instantly, there's little need to hire in anticipation of a pickup in business."

"When they do hire, big U.S.-based multinational companies are more able and more willing to hire overseas, both because wages are often cheaper there and because that's where the customers are."

"some employers insist they can't find workers with the skills they need at wages they can afford."

"difficulty in hiring workers "with specialized technical skills, particularly in the health-care and technology sectors."

But workers without college degrees find well-paying jobs scarce."