Regulatory fog chokes hiring

Labor Day celebrates the contributions of the American worker to our nation's strength and freedom. Sadly, on this Labor Day nearly one-in-10 American workers are still sidelined, nearly one-in-five are underemployed, and many who are actually finding work are settling for lower wages than what they previously earned. Although Utah's 7.4 percent unemployment rate still hovers below the national average, over the last year the Salt Lake City metropolitan area alone lost close to 9,000 jobs.

Meanwhile, many corporations forced to adapt to shrunken consumer demand actually have increased productivity, improved profitability, reduced inventories and sit atop record amounts of cash. Interestingly, consumer confidence and indicators for global trade are all up.

With so many positive economic indicators, why are American companies not hiring?

In a word: uncertainty.

As potential employers sort out their plans for future hiring on this Labor Day, they may have cash, some increased demand for services and room to grow inventories, but they are in a fog about what the real costs are for hiring future workers.

Why? Employers remain woefully in the dark about the final regulations for this year's massive overhaul of health care and financial markets. They simply don't know the new rules of the employment game; consequently, it is a very hard game to play.

Federal legislation never implements itself. Instead, Congress delegates final rule-making to regulatory agencies that in turn must follow lengthy procedures. Even after rule-making, final implementation is inevitably delayed by lawsuits.

Healthy markets require clarity. Labor markets are particularly complicated because of their regional nature and the variability in workers' training, experience and motivation. To reduce these complications, labor markets require crystal-clear rules about the relationship between employer and worker. Ever since health care benefits have become a critical part of the employer-employee relationship, uncertainty about the real costs associated with health care benefits makes rational calculation about hiring challenging.

Regulatory uncertainty is particularly vexing for the biggest driver of employment — small businesses. Small businesses simply can't absorb the legal and accounting fees that help large businesses navigate through the mists of regulatory change.

The adaptability and productivity of the American worker is unparalleled in the world. It is therefore lamentable that the recent major reforms have come with such thick regulatory fog and uncertainty that employers simply can't react normally to otherwise positive economic data.