Sunday, July 1, 2012

Here is my quick analysis of how a small business makes a hiring decision in terms of Stimulus vs real economic growth. Need your help in telling me where I am going wrong...

If I were a small businessman looking at the economic landscape and how it is being addressed by our political class (and reported on by the media), I would wonder if they had any idea of what my day is like and how I make hiring decisions.  Keep in mind, I am just a "regular Joe/Josephine" trying to do the best I can.

Senario 1: Assume I hear of a local business getting stimulus funds to do some road work in my area and I know there will be 100 additional workers with, say, $20 additional discretionary dollars to spend at my business during any given day (not all at once, spread out during the day).  Remember, I am not the only business in town, so my fellow shopkeepers are in the same position I am in. 

I know this will money is temporary and will last about 6 months and we will go back to status quo.

With this information, do I ask my existing workers to (1) work harder, (2) give my part-timers more hours, (3) offer overtime to existing full-time employees or (4) hire an additional full-time and/or part-time worker? 

Given what I know, I am pretty sure 1-3 are viable options, with preference to (1) and (2), but I am pretty sure I don't do  #4. 

Scenario 2:  A new company (or an existing one expanding operations)  renovates and moves into a building down the street from me.  I know there will be an addtional 100 workers with, say, $20 additional discretionary dollars to spend at my business during any given day on a permanent basis.

I know this money will not be temporary, will last well into the forseeable future and we will NOT go back to the status quo.  In other words there is a sustained higher level of spending in my business.

Using numbers 1-4 above, how might my hiring decision(s) be affected now? Does it change, "at the margin"?  When I look at my current situation, I believe I have to go with (2) at the minimum and/or most likely (4) , right?

Conclusion:  As a small businessman, I am happy with Scenario #1 because it allowed me to potentially "save" a job in my business that I otherwise might have had to eliminate---it did create stability for me.  Although some of my fellow shopkeepers may have been able to "create" a new, sustained job from the temporary stimulus, I think a majority of them faced the same dilemma I did in making hiring decisions.

What small business people are looking for are signs of Senario #2 emerging beyond what has been offered in Scenario #1.  Only when that "Leap" is made from one to the other, will  they hire and we will have a robust expansion and recovery.

The question is, how do we move from one scenario to the other?  Are policy makers and politicians focused enough on that or are we still just short term thinkers?
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