Sustaining Job Growth: How the Fiscal Cliff Could Affect Employment

2012 has put many Americans back on the employment path. As of this past November, the unemployment rate has dropped below 8 percent. Job growth as a whole has increased as has spending on recruitment and training. But negotiations between policy makers in Washington threaten to undo all the progress the job market has made this year. Unfortunately, most small startups may be blindsided by a change in tax laws. The consequences could affect hiring and job growth in 2013. Here’s a look at how the “fiscal cliff” could affect IT:

Higher Taxes Threaten Job Market
The phrase “fiscal cliff” has been used to define a set of changes in tax laws for federal agencies and privately owned companies. If imposed, such tax cuts would limit the tax provisions employers use to write off expenses, such as those commonly associated with assets and hiring. Unfortunately, many new tech companies have been too pre-occupied with R&D and product promotion that they’ve failed to recognize the possible impact “fiscal cliff” policies could have on hiring.

Congressional Budgets project a fiscal impact of over $530 billion, which could return the un-employment rate back to 9 percent in 2013. This is why many are getting a little panicked as 2012 comes to a close. We’ve fought so hard to bounce back from a recession of epic proportions; the fiscal cliff threatens to put the country back into a slight recession. As of yet, nothing is set in stone. Small business owners can take precautions in order to soften the impact any “fiscal cliff” changes may have on their organization.

5 Steps To Prep for Fiscal Cliff
Training – Government spending cuts means less money for hiring new employees. Analysts recommend employers train existing personal to fill the void of positions they might need. Training existing employees may save companies money in the long run and once the economy bounces back, hiring can peacefully resume.

Price Reductions – Reducing the price of products sold can salvage business-to-business relationships. Many customers will be affected by increased taxes. Reducing prices will soften the blow for them.

Extending Contractual Agreements – Companies who have contractual agreements with federal agencies should extend the terms of their agreement. Such changes will foster earnings in the long run and give companies more time to conjure up new business leads.

Adjust The Terms of Service – Small business owners may save money, and retain employees if they make a switch to subscription-based services as opposed to monthly contracts. Offering customers incentives in exchange for long-term subscription agreements will help companies retain business.

Concluding Thoughts
It’s taken our country nearly 4 years to recover from the depths of recession, and policy makers are forced to take action in order to get our economy back on track. However, members of congress fail to release that the job market is still fragile and that any changes imposed could undo the progress employment has made this past year. It’s a slippery slope; on the one had you have our nationwide economy to consider, on the other you have the fragile job market. A reduction in tax incentives for employers while the economy is still in a state of recovery may not be the best idea.

By keeping a watchful eye on spending and more importantly, the relationships employers have with clients, jobs may be protected. In other words, protect your business and you will protect jobs. Though one thing is certain, the risk of damage to job market growth in 2013 is real. Lets hope “fiscal cliff” policy makers are able to find a balanced approach for implementing new tax laws this coming year. The health of our job market depends on it.

About the author: James Mulvey is a technology writer and blog director at Colocation America, a data center company based in Los Angeles who specializes in colocation and dedicated servers.

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One Response to Sustaining Job Growth: How the Fiscal Cliff Could Affect Employment

  1. Tina Strickland says:

    Thanks for the article. The information provided helped put into perspective some of the things we are seeing in our organization. Companies are attempting to reduce assets in the form of inventory and implementing hiring freezes in anticipation of the “fiscal cliff”.

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