Hiring or Renting?

By Lloyd Graff

As an owner of two small businesses, which are doing pretty well these days, I am in the throes of a daily decision making quandary. Do I hire more people, rent more people, or just watch which way the wind is blowing? This is a very real problem for me and I sweat it almost every week.

The unemployment/employment numbers display the split personality of the current American economy starkly. The Unemployment Rate and number of Unemployed Persons have decreased significantly over the last year. However, in June, the average workweek for all employees on private non-farm payrolls was only 34.5 hours for the fourth straight month. (http://www.bls.gov/news.release/empsit.nr0.htm)

The Graff-Pinkert & Co. used machinery business is busy. Our machine cleaning and repainting area has been understaffed for years. This year we finally decided to do something about it by hiring a second shift. Rex Magagnotti, who watches over the plant, in addition to his major role in buying and selling machinery for the company, has been urging me too attend to our log jam of dirty machines for a long time. I hesitated spending the money, largely because of all of the add-on costs of full-time employees, particularly expensive health insurance. The compromise was to hire part-time people, summer people, and rented employees from temp agencies. This way I can get my elbow grease and cleaned machines without a sense of deep commitment to the folks we hire.

Like many small business owners, I am deeply invested in my employees.

Many have worked for the company for more than 20 years. They are members of the “Graff-Pinkert family.”

This was not the approach I took when I hired a new electrician and office manager last year. They were clearly full-timers, and I was all in with them. But for a second shift, I just wanted hardworking summer folks or people who knew they were temporary, and expendable. It’s the new American workforce, less than 30 hours a week, rental people from temp agencies like Manpower or contract workers.

I have learned that some workers also play the game very skillfully, maneuvering their hours so they can draw unemployment pay for many months after their mediocre short-term work ends. I find this annoying, but if somebody is going to spend their creative talent on gaming the system, so be it. I have better things to do than worry about their petty shrewdness. They will never end up with good long-term jobs.

The Affordable Care Act (ObamaCare) is certainly one reason part-time employment is soaring and full-time jobs are scarce. As a hirer, I am always struggling with the calculation of whether a person is worthy of full-time employment and the huge premium I pay for such services. It is very difficult for a potential low skill hire to make a convincing case that they are worthy of the full timer premium.

The issue of the day is the push to almost double the minimum wage to $15 per hour. It is the rebound reaction to the dearth of high paying full-time jobs. If the inflated minimum wage becomes local or national law, the sure result will be shorter hours, fewer jobs, and high real unemployment. It will mean young workers will not get the vital experience they need to become productive, high-paying earners.

I sympathize with poorly paid part-time workers. Their plight stinks. I look at Graff-Pinkert’s best employees who learned skills on the job and prospered over the years. Today they would have a harder time getting in the door and proving their worth.

There is still plenty of opportunity for bright, ambitious, hard-working people – even those without a lot of book learning. But unless they have connections or good luck, the economy and the politicians are inadvertently pushing them into 29-hour jobs or difficult to stitch together freelancing gigs.

It’s tough out there, but I have to watch my bottom line. I will be rationing my full-time jobs and looking for talent for the short term.

Question: Is $15.00 per hour the right minimum wage?

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13 thoughts on “Hiring or Renting?

  1. AvatarAlf

    I feel the pain from the other side. After over 25 years being laid off from one industry to another (not just companies, but whole industries as they move offshore or become obsolete), I have found a job I like at one of the Midwest’s biggest used machinery dealers. I have been working in the telemarketing department for 3 years, and have become the #2 person in the department (the #1 person is related to the owners). In the old days, cold calling was the way people moved up in the company. But they have told me that it would be impossible for me to be promoted.

    This is not just hurting me but hurting the company. When I attended a fabrication firm’s open house and came back with some sales leads, I was berated for stepping outside my job description. I have been a semi-professional photographer since I was a teenager and am able to take pictures twice as good as what they now use in their advertising, but they continue to use warehouse workers for their advertising photography.

    While my supervisor relies on me for training and computer help, I feel frustrated in not being able to get into the sales game, to start following up the leads I find. There was a time I could run these machines, now I’m not even allowed to talk about them.

     
    +1
  2. AvatarJoe

    Lloyd,

    I have mixed feelings about this, increasing the minimum wage to that point would be devastating to small business, but I also agree that it is too low. Many people like you feel the need to cry that Obamacare is hurting your bottom line and keeping you from hiring full time workers, but wasn’t that the case before Obamacare as well? Companies such as Walmart have been playing the game for years, working people just to the point of being required to give benefits such as insurance. In other words I’m not buying your Obamacare argument, the law is certainly not without many faults but to use it as a reason to keep people part time is political nonsense.

    On the other side of that same coin, I as well have seen people who play the system to extend unemployment, this costs all of us, not just in tax dollars but in higher unemployment insurance for employers, which in turn can drive down wages.

    My answer to your question is no, $15.00 is too high but there needs to be a way for hardworking people to work their way out of poverty and our current minimum wage is too low to accomplish this. Until such a time that employers learn to respect their employees as much as profit, and employees their employers right to earn a profit, no amount of minimum wage increase will change things for these families.

     
    +7
  3. Avatarallen

    No.

    The only minimum wage ought to be that which is agreed upon between employee and employer.

    Anything else means that there’s some arm-twisting going on somewhere and getting a law passed legalizing some forms of arm-twisting doesn’t change that arm-twisting from the coercive activity it is to something admirable. It’s still coercion but, with the marvelously human ability to justify just about any course of action that provides an advantage, we find ways to justify that coercion.

    Beyond the ethical considerations there are the more distinctly human considerations and the minimum wage doesn’t come off all that well in that regard.

    If the minimum wage is $15,00/hour then everyone whose skills don’t merit that rate of pay don’t get a job. Period. At $10.00/hour they might be worthy of their higher to a less responsible, less demanding position. Pushing a broom rather then driving a forklift say. But with a minimum wage they’ll never get the broom-driving job and never get an opportunity to get the forklift-driving job.

    Only a few years ago the much maligned burger-flipper jobs were going begging in the Detroit area at $10 to $12 an hour. The economy was hot and the labor market was tight so prospective employees could pick and choose. Under those circumstances an employer might be willing to hire someone with $6/hour skills in the hopes that they’d be worth the money. But when the economy cools that chance disappears like a cool breeze because the risk becomes greater then the possible reward.

    The minimum wage raises the height of the first job on the employment ladder making an already difficult situation, landing that first job, just that much tougher. Like all lefty policies it never works as advertised and generally ends up hurting the people it was supposed to help.

     
    1. AvatarRon B

      Allen, your response makes sense in many areas however I would like to (with respect) add to your synopsis. You use the word coercion in explaining your view but I would add the word collusion in addressing the other side of this equation… without minimum wage laws, I believe most employers would refuse to pay anything close to fair and people would be forced to accept something as opposed to nothing… and government would be (indirectly) subsidizing all business as a result… and we would be residing in the ultimate plutocracy.

       
      +2
  4. AvatarEd

    The major issue with minimum wages is that some time in the 80’s the “experts” decided that we woudl outsource our “dirty” manufacturing jobs and become a service economy where everyone would go to college. We eliminated any skills training programs and shipped the jobs to whatever low cost manufacturing area would take them. Now we have shuttered factories and the only jobs left are no skill minimum wage jobs. The “experts” nowbelieve that we need to raise the minimum wage so cashiers can earn a living wage. Sorry, but that isn’t the answer, bring back manufacturing and give people opportunity and the low wage jobs will get filled with people starting out and they will learn their way up to a middle class living. When I was a boy most of the people working in retail were teenagers starting out. Now retail is filled with middle aged people who undoubtedly have higher skills, but can’t get a job that pays the bills. In manufacturing there is a place for someone at virtually every skill and education level, stop the over regulation and confiscatory taxation, businesses will come back and the people will prosper.

     
    +5
  5. AvatarGreg Parker

    I am a MFG Engineer, 50 years old. Here are some of my thoughts:

    Teenage / college summer jobs are way down due to high cost to employ.

    Possibly many of the people in low ranges should have thought about doing better in high school and then learn a trade or skill. So to pay someone $15 for not striving in school or learning a skill instead, taking it easy, is difficult for me to agree with.

    It seems to be rooted in the family again, if the parents read to kids and require good grades it seems more often than not, these goals are achieved. I knew I was going to college before I was 5, so did my kids. They all have livable wages.

    What is sad is some who are voting for the $15 hour, would be the first to automate positions to reduce people on the payroll.

    In the long run if minimum wage was $15, all wages would have to go up, or once again the middle class would absorb the most pain.

    I agree with Lloyd that today not as easy to get in and work your way up, may never get in the door. Now with such few summer jobs for kids, when I interview many of them, they have no experience.

    Here is a question for all. If you were responsible for training 10,000 people from the employment rolls…. What would you train them for or what training?
    How about show up on time and dress for the job you want, not the job you have.
    How about doing more than the minimum required.
    How about being positive?
    Then what actual skills – robot training, CNC, .
    I don’t know either, but a great work ethic will go far, still.

    Kind of unfair that modern countries have to compete against third world labor rates.

    Sorry for babbling.

     
    +4
    1. AvatarRon B

      Sorry Greg… you lost me with the ‘I knew I was going to college before I was five’… and then moved on to personal etiquette (of those who are not as blessed). Millions of American youths do not have the generational platform that has serviced you nicely. Play it forward Greg and you will be greatly rewarded with pride and satisfaction that cannot be obtained through any college degree. Have mercy on the poor and meek… not criticism. I have (and I’ll bet you have also) been exposed to plenty of ‘owners sons’ (and the like) who have demonstrated absurd personal responsibility with tremendous resources because ‘Daddy’ has their education covered and their business foundation financed… it’s a two-way street.

       
      +6
    2. AvatarBill

      Loyd,

      A few thoughts,

      No the minimum wage should be closer to 20 dollars an hour. As it should be if it had kept up with inflation.

      All of the “there should be no minimum wage ” folks are greedy SOBs that are only looking out for themselves!

      The minimum wage jobs the kids used to get in the summer aren’t there anymore because out of work adults have filled many of the positions.

      I have heard you complain about not finding employees for your machine cleaning shop before. ” I pay them $10.00 an hour no benefits” “The seemed happy to get the work”
      How long do they last?
      10 bucks an hour was what that low skill job paid in 1988 , I know because I had a very similar job…..

      And lastly I think your FULL OF SHIT on the “does the employee make me enough money to get benefits” all of your employees from top to bottom are a team of people working together to make the company succeed.

      Just my 2 cents

      Bill

       
      +4
  6. AvatarLen

    Do you or don’t you hire full time employees all depends on the business needs of the company. If the backlog is short/limited the answer is easy BUT if the backlog is growing then I think you know the answer. After all you know the man hours needed to complete the backlog at hand! I fortunately have a full time job w/benefits which I am grateful and thankful everyday. Maybe it was the way I was brought up in a blue collared family, work hard and you will receive your just reward. If people want to cheat the system, in the end they will have to answer for their abuse which can be quite harsh. But like any business owner which I am not, it’s all based on experience and your gut feeling. Then again if everyone just sits & waits for the next shoe to drop why would have come to own you own business if it wasn’t for risk taking.

     
    +1
  7. AvatarMisterchipster

    Why not eliminate the minimum wage and the entitlements that our system provides? Working would become a necessity to survive and the true value of employment would be realized. There is very little incentive to work when in some states you can approach or exceed the current minimum wage with unemployment benefits and public aid hand outs, the burden of which is placed on those who do choose to work and the employers who do so. It would be a novel concept if we held BOTH the employers and the employee responsible for everyone’s welfare. The current swing toward socialism will certainly not do that, more intervention will only slant our system towards more “entitlement” of which we have plenty. We are moving from a producer society to a service society. When nothing is produced how are we to add value?

     
    +2
  8. AvatarMIke

    No, the minimum wage is just that, a starting point. I have a small business and hire mostly high school and college kids. I pay more than minimum wage to make sure I get the quality worker that I want. If they raise the minimum wage to $15 from $7.25, will I also get that big of a raise in pay? Probably not and so the business that have to pay more will now charge more. Those getting the raise will be able to handle paying more for burgers but for those of us who do not get a raise, we will have to make cuts in other parts of our budgets. I agree with some of the other posters, get an education, put forth a better than average effort and there will be opportunities to make more money.

     
    +1
  9. AvatarLee H

    I didn’t go to college. I worked for a paving company in the summers all through High School. It was hard work. After High School I got a job at a local service company in the compressed gas business. I had no real experience. They put me in the tool crib. In six months I was working in the Service Department and within a year I was traveling all around the country servicing high pressure gas compressors. Throughout my career I’ve had the good fortune of being mentored by smart and talented people. I always kept a positive attitude and put in more than I got out. When opportunities came I was ready to take them on. Since the tool crib I have worked for 3 companies, eventually making my way into a sales position. Now, at 53, I’m not rich, but I make a good living and together with my wife who has a similar work history and strong work ethic, we’ve paid off our house and put our kids through school. We both established and maintained track records that made us valuable to our employers. When layoffs came we survived them. I realize one’s track record doesn’t guarantee employment these days, but it sure helps. As I travel the country now I see a wide variety of attitudes in service organizations. Some employees don’t deserve $1/hour but still they are paid the minimum wage or more. Others are stars who earn much more and they deserve it. The latter example is how it should be. Make what you earn. People can make or break a company. When a responsible employee makes money for a responsible employer, neither need worry about job security or personal growth.

     
    +3
  10. AvatarSkip Westmaas

    I don’t know. I can see both sides of the coin in terms of raising the minimum wage.
    I do feel strongly that we do not have a “skills gap”. What we have is an “attitude gap”. In this age of entitlement, it won’t matter whether the minimum wage is $7 or $20 if people feel they “deserve” a job. In our shop (screw machine) we need employees that:
    1. Show up everyday on time.
    2. Have a positive attitude and desire to learn.
    3. Get along with others.
    4. Work hard and give their best (most of the time).
    We don’t need prospective employees with “skills”. We have had way too many employees with “skills”, but failed at one of the 4 above, had a hidden undiagnosed mental condition or what I would term as “personal issues” that only therapy could resolve.
    How do we fill this “attitude gap”? I do not know, nor have we perfected the ability to determine “attitude” in an interview when most are at their best behavior, but we are getting better.

     
    +5

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