Why Some Plan to Not Hire Soon: Thoughts On the H.I.R.E. Act

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by Nanci Lamborn, SPHR

Recruiters are very likely to have heard recently about the new Hiring Incentives to Restore Employment (H.I.R.E.) Act which was signed into law in March (http://tinyurl.com/yaz4akc) and which offers what could amount to a fairly decent tax break for companies willing to hire workers from the unemployment line. According to the act, employers who hire unemployed workers this year (after Feb. 3, 2010 and before Jan. 1, 2011) may qualify for a 6.2-percent payroll tax incentive, in effect exempting them from their share of Social Security taxes on wages paid to these workers after March 18, 2010 so long as a few other conditions and timelines are met.

The concept is admirable. After all as we are painfully aware, the nation’s rate of unemployment is still at unprecedented levels (http://tinyurl.com/yalzw7u). And there is another number which may even be more pressing, now being referred to as the “real” unemployment number, or the “U6” (http://tinyurl.com/2cnhf9z.) This number may be much worse than most of us realize.

The “U6” is defined by the Bureau of Labor Statistics as the total unemployed, plus all “marginally attached workers”, plus total workers who are employed part time for economic reasons. Interestingly the further definition of the “marginally attached worker” includes, as defined by the BLS, “…workers considered to be ‘marginally attached to the labor force.’ These are persons without jobs who are not currently looking for work (and therefore are not counted as unemployed), but who nevertheless have demonstrated some degree of labor force attachment. (These individuals)… must indicate that they currently want a job, have looked for work in the last 12 months (or since they last worked if they worked within the last 12 months), and are available for work. ‘Discouraged workers’ are a subset of the marginally attached. Discouraged workers report they are not currently looking for work for one of four reasons: They believe no job is available to them in their line of work or area; They had previously been unable to find work; They lack the necessary schooling, training, skills, or experience; Employers think they are too young or too old, or they face some other type of discrimination.”  To find out the most recently posted “U6”, the BLS includes it in their regularly posted quarterly statistics on their website (http://www.bls.gov/lau/stalt.htm).  

So enter the H.I.R.E. act to save the day. Or does it?

If employers can so quickly and easily fill their vacancies from the unemployment ranks, why are more and more roles becoming difficult to fill? As AP writer Christopher Leonard wrote in his article late last year (http://tinyurl.com/y9rx4bs), unemployment continues to persist while good jobs cannot be filled, since those at the highest risk for job loss are those least likely to have the skills required by newer jobs. And in an excellent article published in February by the American Society for Training & Development (http://tinyurl.com/yax46s8), their 2009 research identified two underlying causes of this growing increase in the skills shortage, namely that jobs are changing, and that educational attainment is lagging.

Unfortunately if employers are being expected to provide the training necessary to bridge this large skills gap, by the time those retrained workers have learned some of the basic skill requirements to just keep pace, the employer may have spent a year or more of precious salary and have zero productivity to show for it. Suddenly that H.I.R.E. deal just became incredibly expensive.

So you plan to H.I.R.E.?

Nanci Lamborn, SPHR, is a freelance human resources writer and a senior generalist with a global financial software firm based in Atlanta, GA.

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