Jobs Credit Talk May Delay Hiring

If the government plans to give a tax credit for new hires to small businesses, as President Obama indicated Wednesday in his State of the Union address, Congress and the administration should move fast, because of comments like this one:

Maury

January 28, 2010 07:58 PM

I’m a small business owner who is considering hiring new workers. However, I am holding off hiring in hopes of getting some incentive from the government.

Talking about a jobs tax credit, without actually passing one, might be worse than not considering it at all. The NY Times’s Catherine Rampell noted this in a story in October:

The biggest fear among some, though, is that the proposal might unintentionally reduce job opportunities if it sits in Washington too long without passing.

“Particularly for big employers, if they think a job creation tax credit is in the offing, it could certainly be an incentive to delay hiring,” said Lee E. Ohanian, an economics professor at the University of California, Los Angeles. “That means it could have the perverse effect of actually prolonging the recession.”

Most business owners make staffing decisions more directly based on demand for their products or services. If they need people to work another factory shift or answer the phones, they’re not going to wait for a tax credit. But there are no doubt plenty companies on the edge of hiring new workers who, like Maury, are waiting to see if there’s an incentive coming.