It's Job Generation, Stupid

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It is, in short, a world that produces inequities and victims: people who deserve better, people who have suffered real injustices, people whose fate would strike any decent person as unfair. Small wonder that we have seen the steady growth of legislation designed to protect the victims -- from child-labor laws, to minimum-wage laws, to antidiscrimination laws, to family-leave and hazardous-waste laws. Small wonder, too, that there is constant pressure to even out the results, to raise taxes on those who get rich off the process, to make the winners pay a greater share of society's ever-rising tab.

Unfortunately, there are increasing signs that we may have gone too far. In trying to reduce the inequities and help the victims, we may have undermined the most important social program we've got going: the generation of jobs. Jobs, after all, provide for each of us what no government can legislatively confer: self-respect, dignity, economic self-sufficiency, and the wherewithal to contribute to a community and to build a life.

Which is why it's sad that, for the first time, we have begun to hear about companies that are keeping down the number of people they employ so as to remain outside the purview of the Family Leave Act and other mandated benefits programs. Other companies have scaled back their recruitment efforts to protect themselves against specious but expensive antidiscrimination suits. Still others have stopped hiring in anticipation of continued increases in the cost of health insurance, workers' compensation insurance, unemployment insurance, and whatever new insurance the folks in Washington may yet dream up. Then there is the explosion of litigation against companies by former employees determined to prove they lost their jobs through no fault of their own. And all this while Congress gets set to pass what may be the biggest tax hike ever in hopes of bringing the deficit under control.

And we wonder why the economy is not producing more new jobs.

The problem is not that businesspeople have become stingier or more meanspirited. The problem is that, little by little, we have added to the costs and increased the risks of employing people. Every entitlement, every protection, every mandated benefit represents an additional expense to a company -- whether in the form of insurance premiums, taxes, legal fees, time away from the business, more paperwork, additional supervision, whatever. The more employees you have, the greater the expense and the higher the risk. To the extent that employees do actually benefit, moreover, the company gets no credit, no boost in morale, since employees perceive (correctly) that the changes have been imposed from the outside. So the company pays yet receives nothing in return.

What all that adds up to is a powerful incentive for companies to grow without adding employees, or not to grow at all. Meanwhile, the Clinton administration sends clear signals that it intends to continue the trend, maybe even accelerate it, at the same time that it vows to raise taxes on people who take the risks and succeed. To make matters worse, moreover, the administration remains determined to spend some portion of those tax dollars on infrastructure projects that may keep a few people employed for a while but are unlikely to lead to the formation of any viable new businesses. In effect, it will be further undermining the job-generation process in order to produce a trivial number of ridiculously expensive short-term, low-wage public-works jobs.

It's a dangerous game to be playing. It is particularly dangerous in a period when other factors are conspiring to hold employment down -- when companies are struggling to stay lean and flexible in the face of intense competition, when there is growing frustration with the declining quality of entry-level workers, when more and more worn-out entrepreneurs are deciding they just don't want to manage anymore. What we don't need on top of all that is an administration so intent on putting people first that it doesn't realize it is helping to put them out of work.

And yet it is perhaps worth pointing out that the greatest danger posed by the administration's policies is to President Clinton himself. The world of the Apple Tree has weathered worse calamities than a storm of bad legislation and inept government policy-making. Sooner or later, the season will change, the laws will be amended and the rules revised, and the economy will start generating jobs again. In the long run Clinton's anti-employment policies may even produce some benefits. Productivity is almost certain to rise. There will be enormous pressure on companies to introduce long-overdue management reforms that will increase cooperation and efficiency in the workplace.

But meanwhile, if the administration doesn't alter its course and start focusing, laserlike, on job generation, we are probably in for a few more years of continued sluggishness in the economy, annoyingly high unemployment, and persistent sputtering of the great American job machine. And one other thing. Come 1997, Bill Clinton himself will be out looking for work.

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Bo Burlingham: Burlingham joined Inc. in 1983. An editor at large, he is the author of Small Giants: Companies That Choose to Be Great Instead of Big. The book was a finalist for the Financial Times/Goldman Sachs Business Book of the Year Award in 2006. Burlingham is also the co-author with Norm Brodsky of The Knack; and the co-author with Jack Stack of The Great Game of Business and A Stake in the Outcome. @boburlingham