The Unemployment Conundrum
Posted on: March 13, 2009 - Email Article - Printable Version
Unemployment has skyrocketed during the last 12 to 18 months causing bipartisan debates between our premiere legislators as well as ethical discussions amongst our top business figures. Americans know that the job market is in a poor state and continues to worsen as the days pass. The most recent numbers from March 7th show a continuing downward pressure on the livelihood of the U.S. population as the jobless rate clocked in at 8.1% for the month of February as layoffs increase due to corporate restructurings. Now due to this 0.5% increase in unemployment from January, heated arguments regarding a “proper” process to layoff workers has swept America over.
The unemployment rate continues to increase and the more protectionist citizens suggest that we layoff foreigners before Americans to perhaps break any momentum towards a jobless rate of 10%. Members of congress have chimed in from both sides, offering differing views on the subject. Surprisingly, the Republican senator from Iowa, Charles Grassley, appears to be supportive off hiring Americans before foreigners and laying off H1-B visa holders prior to citizens because it is a “moral” obligation for American based entities. Understandably, there is a strong sense of patriotism amongst those backing this idea. However, this politically liberal policy will not help us move toward a solution. This type of thought will move us in the wrong direction as our economy continues its downward spiral. Through history, immigrants came here for freedom and the dream of building wealth and living the American dream. Upholding protectionist ideals will send ripples throughout the world as countries realize that America does not want their citizens living successfully within their borders. This maybe a rash way to put it, but such feelings could escalate to less cooperation on key economic and trade issues as well as foreign relations. The reason Americans have been displaced is due to our lower standard of education and because of the negative attitudes many Americans have towards old fashioned hard work. At the end of the day, regardless of race, the best worker must be retained and if people really care about their jobs then they will work harder than their peers to ensure that they have the best chance of being retained.
How does it make sense for companies to layoff less expensive, often times more productive workers just because the government is influencing them to do so? It simply does not. The H1-B visa window opens up in April with about 85,000 visas available to allow more engineers and programmers from India, China, Japan, and various European countries. Business is business, I believe that legislators influencing such actions is wrong. Businesses are already under stress, why would you want them to retain less productive employees over those that are more productive? It makes no real sense, business is all about providing a specific product or service with the cheapest inputs. On average, payroll (an operating expense) is one of the larger variable costs a business can have year over year. It would only make sense to minimize these costs to allocate funding in a more strategic manner to place pressure on competitors. The technology sector has the most to loose from such actions as major names like Microsoft [MSFT: 29.29, +0.02 (+0.07%)], Cisco [CSCO: 26.08, +0.20 (+0.77%)], and Intel [INTC: 21.17, -0.10 (-0.47%)] have announced layoffs to remain competitive in an extended downturn. Not granting companies the freedom to hire and fire talent based on their own standards contradicts the American ideals on which this country was built. Attempting to retain workers based on nationality is wrong and contradicts basic business strategy where costs should be minimized while output is maximized. We must maintain our open economy, allowing companies to make their hiring decisions independent of government intervention and influence.
What About the TARP Argument?
Regardless of who the company is, I think that HR decisions should be left to appropriate parties at these companies, even those that have received TARP funding. The majority of these institutions are struggling to maintain their operations as losses mount. How could you expect them to layoff sometimes less expensive, often times more productive foreigners to keep around someone just because their American? Financial institutions who do have H1-B visas should not be expected to discriminate and layoff productive workers. This industry which has based advancement based on merit should maintain its HR behaviors. The government does have capital in these institutions, but should request rational behavior that minimizes costs for these companies to preserve capital. Bank of America [BAC: 16.85, 0.00 (0.00%)] should layoff as they have been, cutting the less productive groups to save money and return back to profitability. Hiring decisions should never be based on visa status, but on hard work and success. In the end it is these individuals that will lead these trouble entities back to health.
Let’s not attempt to regulate every little thing about business. Government and business have their place in our society. It is clear that Darwinian principles should determine who to layoff regardless of the institution so costs can be minimized while striving to maximize output with the best talent. We should not allow either to influence the other excessively, but ensure that they coexist together and are integrative in their discussions to maximize the future of both our political and economic environment.
- Santosh Sankar
Disclosure: The mutual fund the author is associated with is long CSCO and GOOG. The author is short liberal ideologies that are supposed to fix our economy.
The Following Stocks Were Mentioned In This Article: BAC, CSCO, INTC, MSFT
Comments
No comments yet.