March 18, 2004

Capital vs. labor. "If you were a manager, why would you hire a human being instead of a machine? Humans get sick. They daydream. And they take coffee breaks. The cost of capital equipment, meanwhile, from laptop computers to lathes, has plummeted since 1995. Moreover, the cost of leasing and financing new tools has fallen to the lowest levels since, well, before there were laptops and lathes. At the same time, federal tax policy has been tilted toward capital spending, with taxes on most dividends and capital gains falling to 15 percent. Changes in the tax law two years ago allow small businesses to write off $100,000 in new equipment immediately, while big firms get a temporary 50 percent write-off. People, however, remain relatively expensive. Let's say an applicant can deliver $35,000 of value for the firm — and she is willing to work for $35,000 a year. Great match, right? Not exactly. In addition to her salary, the employer also has to pay a 7.65 percent Social Security and Medicare tax, and contribute to workers' compensation and unemployment insurance. And then there's health insurance costs: employers paid an average of $6,600 per family last year .. ". more TODD BUCHHOLZ. Buchholz is the author of the bestselling book New Ideas from Dead Economists: An Introduction to Modern Economic Thought. Posted by Greg Ransom | TrackBack