A recent report published by McKinsey Quarterly must have jolted quite a lot of those people who are quietly hoping for an end to this fear and uncertainty about the economy which some say will not be looking up anytime soon while others keep flaunting the growth figures and positive aspects which muddle up the whole issue further leaving everyone gasping for breath! If you wish to, you can find it here: http://tiny.cc/v25lx
Risk Aversion or Self-protection?
For those who would rather not take the trouble, I will paraphrase it here: companies today are under-investing in product development and even sales and marketing! Most decision makers are not pushing for growth and general performance improvement out of a risk aversion that has been found to dissuade a company with revenues exceeding $1bn to reject an opportunity requiring a $10 million investment – with potential returns over $40 million! The report also suggests that companies with full coffers are behaving contrary to expectations and definitely not exhibiting the normal tendency to invest more in the great bargain offered by a slack economy. The report seems a must-read for the decision-makers of this world, who need to do a reality check on what their actions could mean for the employment scene and the economy as a whole, in these times of mounting unemployment figures all around.
Economic theories insist that governments which take proactive measures to reduce unemployment, and its deleterious effects have provided a boost to their respective countries. As American companies are recognizing that by outsourcing manufacturing and other services to other parts of the world, they have lost their ability to scale up and innovate further – the pre-election efforts of President Obama to improve the total non-farm payroll employment created during his term – through tax cuts and incentives for job creation may provide the necessary boost to counter-act the effects of risk-aversion and increase jobs.
Companies cannot simply be expected to forgo the cost advantage and convenience of outsourcing unless measures are taken to ensure that the necessary skills are locally available and when other fiscal measures are put in place to make outsourcing unviable or keeping the jobs within the country more profitable.
Does Hope float Eternal?
Tax cuts are always welcomed by employees and the boost offered to the employer community through reduced FICA obligations, and waiver of FICA on payroll growth, tax credits for hiring veteran and long-term-unemployed, and for hiring the disabled & unemployed, if approved, are expected to act as a shot in the arm for the economy and restore some faith in it. The bridge-to-work program is expected to encourage workers drawing unemployment benefits also to consider taking up something, even if part-time, without any withdrawal of the benefits.
Many feel that the bill will bring scant relief to the burdened economy while some skeptics are considering the possibility of employers deliberately reducing the headcount and then increasing it to claim the benefits under the plan (nullifying its ultimate objective) while the world wants to know the full details of the sources of funding for the $447 billion.
The plan attempts to boost the economy and create jobs at the same time, it provides major tax relief provisions and encourages growth in hiring. Of course, we can only wait to see what flavor of the plan gets passed and the exact effect it will have on the economy and its players.
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