My Worries about the Job Market

Earlier, I wrote about today’s jobs report. The variable that’s truly bothering me about the economy is new job creation because it has become much more expensive to hire and terminate employees. As the owner of a small business, I’m very worried that the healthcare bill will impose a 35% tax on premium healthcare plans.

Instead on extending health coverage, Senator Backus’ plan calls for taxing generous healthcare plans and would force the health insurance industry to slash health coverage to avoid the 35% tax. Thank goodness that unions with the ear of Congress pointed out that they didn’t want to pay this 35% tax on their “Cadillac” health plans. If this healthcare tax is imposed, many small business owners will simply strip their health plan of all the premium benefits and replace them with “bare bones” plans.

Not only does the proposed healthcare tax cause small businesses to hesitate adding more employees, but it’s also gotten more expensive to terminate employees. If a business terminates an employee, thanks to Congress they must now pay their healthcare (the COBRA portion) for nine months. I travel a great deal and I can already see the results of this. Luxury hotels seem to be hiring more foreign workers on temporary VISAs instead of legal residents, since they can terminate foreigners easier as their VISAs expire.

The reason that I picked on luxury hotels is that 32 of them, such as the St. Regis Dana Point, the Four Seasons San Francisco, have recently defaulted on their bank debt. The Ritz-Carlton Palm Beach is a mile up the road from my Florida home and is also struggling with extremely low occupancy.

Running a luxury hotel is a cyclical business, so the more temporary workers you have on foreign VISAs, the more you can cut costs and adapt to a cyclical business. It bothers me that some businesses have figured out that it’s cheaper to hire foreigners on temporary VISAs than legal American residents thanks to all the benefits that must be paid.

I’m very worried that it’s going to take a long-time for unemployment to decline significantly. Only the healthcare industry is adding jobs since even government jobs are being eliminated on state and local levels. If the Backus plan is passed with the 35% tax, I can guarantee you there will be more layoffs. The healthcare industry might have its own layoffs if MRIs and other expensive tests become less common in the future.

I certainly hope that I’m wrong regarding my employment concerns. But the White House, the Fed and most private economists have all warned that systematically high unemployment remains a major drag on the current economic recovery.

More Louis Navellier



RSS Feed

Little Book

InvestorPlace Network