Companies and Workers in the Economy: “Even if sales do improve, a surge in hiring is unlikely”

Posted by Kendall Harmon

“Because of high unemployment, management is using its leverage to get more hours out of workers,” said Robert C. Pozen, a senior lecturer at Harvard Business School and the former president of Fidelity Investments. “What’s worrisome is that American business has gotten used to being a lot leaner, and it could take a while before they start hiring again.”

And some of those businesses, including Harley-Davidson, are preparing for a future where they can prosper even if sales do not recover. Harley’s goal is to permanently be in a position to generate strong profits on a lower revenue base.

In some ways, the ability to raise profits in the face of declining sales is a triumph of productivity that makes the United States more globally competitive. The problem is that companies are not investing those earnings, instead letting cash pile up to levels not reached in nearly half a century.

“As long as corporations are reinvesting, the economy can grow,” said Ethan Harris, chief economist at Bank of America Merrill Lynch. “But if they’re taking those profits and saving them, rather than buying new equipment, it hurts overall growth. The longer this goes on, the more you worry about income being diverted to a sector that’s not spending.”

Read it all.

Filed under: * Economics, PoliticsEconomyCorporations/Corporate LifeLabor/Labor Unions/Labor MarketThe Credit Freeze Crisis of Fall 2008/The Recession of 2007--Politics in General

Posted July 27, 2010 at 6:26 am [Printer Friendly] [Print w/ comments]

1. Chris wrote:

is this hope or change?  As long as Barry O is our President, this will be the status quo.

July 27, 6:49 am | [comment link]
2. John Wilkins wrote:

This just proves Keynes is right.  Businesses take a long time to reinvest.  In the long run, we’re all dead.

It does go to show that businesses are benefiting from the stimulus.  They just don’t want to share the wealth with the American Worker.  Perhaps the worker might someday realize they’re getting screwed.

July 27, 9:19 am | [comment link]
3. AnglicanFirst wrote:

“It does go to show that businesses are benefiting from the stimulus.  They just don’t want to share the wealth with the American Worker.”

Why start a business if after all the hard work of doing so, the business doesn’t earn a profit.  Why no put money into savings until business conditions are more favorable.

A business’s money/assets belong to the business and not to some entity as vaguely defined as the “American worker.”

“Workers” ‘punch time clocks’ and expect ‘some body else’ to do all the hard work and take all of the risks of starting up a business.

Now what was that about “The Little Red Hen” and who gets to eat the bread?

July 27, 10:01 am | [comment link]
4. AnglicanFirst wrote:

Reference my comment #3.
Please correct “Why no put money into…” to read “Why put money into….”

Still on my first cup of coffee and I was thinking in Gaelic and not English.

July 27, 10:05 am | [comment link]
5. Billy wrote:

JW, #2, the worker is getting screwed by your liberal Federal gov’t at present.  No business, faced with the uncertainty of regulations and taxes and faced with the persecutorial language of this Administration (and especially Ms Pelosi - who talks often about how the gov’t has to get those profits that business makes), is going to do anything but hold onto its profits, so it can be prepared for what lies ahead.  This Administration does not seem to understand that; in fact, this Administration does not seem to understand much about running a business - guess it could be because no one in it has ever run one.  You seem to be under the mistaken impression that business is “in business” to provide jobs for workers, when, in fact and in theory, it is “in business” to make profits for its investors, so they will continue to invest and allow business to grow and make more profits, ad infinitum.  As a by-product of that system, workers are hired and paid market force wages for their work, depending on how skilled they are and, like any other supply item, how many their are in their particular field of work.  There are some variables, obviously - but they a usually brought on by outside forces - like union power or gov’t intervention for social engineering purposes, which almost always has consequences harmful to the worker.  That is the free enterprise system - you obviously advocate a more socialist system, in which the worker is the primary concern, not the advancement of the business.  While that may be altruistic, it does not ensure that business continues to exist, so that workers can continue to have jobs.  In fact, in a global economy, created in Mr. Clinton’s reign, when NAFTA was passed, the socialistic approach to business will put that business at a competitive disadvantage, as we are seeing in Europe today.  Rather than railing at and tearing down business, you and this Administration and churches like TEC would be better off trying to help those who are being left behind in the world economy become better skilled and better educated so that they become useful to business.

July 27, 2:20 pm | [comment link]
6. Satulan wrote:

AnglicanFirst and Billy have it right.  But the current administration and congress are merely compounding the pernicious effects of all the “protective” legislation in the last 75 years, all of which have added to the burdens, costs, and risks of employing human beings. Every employee carries the risk of a future lawsuit if he or she should ever be fired, or earn less than someone he or she deems to do equal work, or decide to make a career of malingering, or develop some “disability”, or hear or say something that a juror or imaganitive jackal of the plaintiffs’ bar might think offensive.

In addition to the risk of litigation, there is the certainty of having to pay a batallion of labor and employment lawyers to try to build bomb shelters to reduce the risk of litigation and/or ever more increasing EPLI (Employment Pracitices Liability Insurance) premiums.

If society wants more employees, it ought to stop “protecting” them to death.

July 27, 3:35 pm | [comment link]
7. Br. Michael wrote:

If JW is so concerned about workers why doesn’t he hire a lot of them and put them to work at a living wage and full benefits.  I suggest 20 to start.

July 28, 8:14 am | [comment link]
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