Cost of employment

A few years ago, I was invited to speak at a class at the Ford Sharonville plant.

The class was titled "How to Start Your Own Business". I was told by the person teaching the class the course was designed for workers in the plant and the company provided an entire diverse curriculum for the plant workers. The courses could be taken on company time with no fees.

I inquired as to why Ford would offer such a course on starting a business. The instructor told me the company has told the employees at the plant that the plant would not be open forever; that eventually they needed to prepare themselves for a life after Ford and that the company would help train the employees for their future.

While it seemed odd to me, I did offer to do a class on the costs of having employees.

During the class, I went through the mandatory taxes and benefits that company's are required to pay on behalf of their employees.

FICA match
Medicare Match
Federal unemployment
State unemployment
Workers comp.

I also discussed issues like benefits such as vacation, sick days, medical insurance, OSHA standards, ADA requirements, even the costs of non productivity like the class they were currently taking, etc., etc.

In the middle of my presentation, one of the guys asked an observant question; Why in the hell would anyone ever want employees?

I counsel clients that, depending on the business, employees need to generate 3-4 times their salaries in net income. For instance, if you pay a worker $10.00 an hour you need to get $30-$40/hour in revenue generation or other expense reductions.

So when wages go up, it's not as simple as just a wage increase, it runs all the way through the cost of production.

I just affirms my theory that when we artificially increase cost of production, company's will always outsource the production to the true "market" value.