N=1

June 15th, 2011 at 8:56 pm

Pulled from comments:

“By the way, I am a small business owner (less than 50 employees), and demand for products IS the most important factor in my hiring of employees, not all this other stuff. If no one’s buying I’m not going to hire, period.”

OK, it’s a small sample, but there it is.


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10 comments in reply to "N=1"

  1. Emanuel T. II says:

    On the question of demand, do small businesses currently have an issue with generating demand that’s both nationally and internationally competitive?


  2. Virgil Bierschwale says:

    Interesting question.

    Let’s take a look at the potential of overseas clients versus local clients.

    http://keepamericaatwork.com/?p=186792

    I personally believe that a small business owner is dependent on its local community for the majority of its business.

    Maybe a different perspective will help you to see where your customers come from and where our tax revenues necessary to run the country come from

    http://keepamericaatwork.com/?p=152062


  3. Dick C says:

    To commenter Emanuel: What does “generating demand that’s both nationally and internationally competitive” mean? I’m self employed and there’s only so much I can do to generate interest in my product. Are you suggesting I should work for a wage that’s competitive with S.E. Asian labor?


    • Emanuel T. II says:

      I’m not suggesting a decrease in wages. I’m actually wondering whether the innovation tools have been made available in a timely manner to a larger network of small businesses than those who are “linked in” to the various laboratories and institutions that do a lot of R&D that small business are not capable of doing normally without a large amount of venture capital.

      Speaking as an engineer, if an engineer patents a design. A small business person or entrepreneur has the opportunity to see that patent, i.e. through a local networking session or some other easily available, highly advertised means, that person may have some use for it that the engineer never thought of. (s)he may tweak the design and patent an innovation themselves and transform the device to generate greater appeal and demand.

      It seems as though that line of R&D to the small business person has either been cut or has lived a fragile existence.


  4. Jeff H says:

    That is, and always will be the main force behind any hiring, but, if individual taxes on dividends went back to normal income tax levels, large companies, currently flush with cash, couldn’t tack it out the back door as they have been over the last decade, and would look to R&D, and upgrading facilities instead of paying corporate tax rates on that money.

    This will drive demand for R&D as well as corporate infrastructure. So, today’s small business may lack demand, but if corporations put money into their company’s instead of into their board’s pockets demand would go up.

    True?


    • bill says:

      Jeff H,

      First, there is no evidence that excessive taxes are preventing companies from investing. Corporations, in aggregate, have over a trillion dollars of cash sitting around in banks. Lowering taxes, i.e. making more cash available to them, isn’t going to change the fundamental reason they’re keeping all that cash – i.e. that there are fewer productive opportunities for investment with falling demand.

      If, say, you own a chain of restaurants and your sales are still down because of the recession, what’s more likely to lead you to build a new restaurant: finding more cash or seeing that there’s enough demand in your existing branches to justify expansion?

      Also, the big problem with this whole line of thought is that taxes are applied to final profits. You only pay taxes when you make a profit. So, for companies to turn down productive work because of taxes would mean they’ve suddenly become profit-averse. It doesn’t add up. Companies build, invest and sell in order to make a profit. They’d all like to keep more of the money they make, but their goal is still to make a profit and they don’t just decide to stand still if they’re not keeping a large enough share of their profits.

      (PLUS: taxes haven’t changed significantly since 2003)


    • Michael says:

      I don’t see why…no matter how favorable the tax regime, if R&D is useless because demand for your products is soft, then R&D is useless because demand for your products is soft.

      One of the interesting aspects of the current Republican laissez-faire approach is that it unsolves problems that used to be solved. One of the most basic — and important — was that of financial failures leading to the economy seizing up. Now that that’s no longer solved, we see a lot of markets not clearing, exactly as anyone who actually knows and cares about markets would predict.

      An economist is someone who understands markets and how to make them work. A high priest of the market religion is someone who worships markets as an ineffable good, and therefore destroys them in his or her ignorance.


  5. jonathan says:

    As a former commercial landlord with some millions of square feet leased to a mix of local, regional and national tenants, I can say absolutely that companies base their plans and hopes on sales expectations. Big companies like TJX track sales closer than people outside the business realize. They chase sales potential and will open in a high tax location if the sales volume justifies doing business. They close outlets because sales don’t meet potential. I can’t tell you how many conversations I’ve had over the years with representatives of major chains about sales. There have been a few about odd concerns, like the inability dispose of certain waste in a particular area, but the managers are beaten up about sales and the corporate offices focus on sales, on why this unit is not meeting potential. True for restaurants, for mattresses, for auto parts, for everything. We are a sales culture and sales are what matters.

    Local businesses pray for sales like people in a drought pray for rain. Sales are your life. Your business dies without sales. I’ve personally kicked out dozens of small businesses and watched more fold. Every one had lousy sales. (Maybe a few had family / retirement issues but even then the business wasn’t generating enough revenue to be worth selling.) We kicked them out because they couldn’t pay the rent and when you talked to them you knew why: they weren’t selling enough stuff.

    Local business owners can control what they make in ways only the wealthy can do. That’s one of the attractions of being a small businessman. You eat your inventory. You may trade some it. Free cash can be your cash and lots of things done for the family become business expenses. Small business wouldn’t function if we cracked down on that, not because of tax rates. In fact, if we raise tax rates a lot, we’ll see more playing with the books. Pay a salary to a relative to lower tax brackets. It’s all deductible.


  6. TC says:

    Hi Jared,

    I’ve been pounding the table on this exact issue over at my blog. The most important issue in hiring is demand.

    Businesses hire more people when they are swamped with demand, not when they have high profits!

    http://traderscrucible.com/2011/06/16/businesses-hire-more-people-when-they-are-swamped-with-demand-not-when-they-have-high-profits/

    Focusing on anything but effective demand is foolish. The best way to stimulate effective demand at this point would be a payroll tax cut.


  7. Max Pyziur says:

    You’ve got Brad Delong’s sense of humor.

    Or is it the other way around.

    Max Pyziur
    East Village, NY


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