Companies that are looking for a good deal aren?t seeing one in new workers. Workers are getting more expensive while equipment is getting cheaper, and the combination is encouraging companies to spend on machines rather than people.
?I want to have as few people touching our products as possible,? said Dan Mishek, managing director of Vista Technologies in Vadnais Heights, Minn. ?Everything should be as automated as it can be. We just can?t afford to compete with countries like China on labour costs, especially when workers are getting even more expensive.?
Vista, which makes plastic products for equipment manufacturers, spent $450,000 on new technology last year. During the same period, it hired just two new workers, whose combined annual salary and benefits are $160,000.
Two years into the recovery, hiring is still painfully slow. The economy is producing as much as it was before the downturn, but with seven million fewer jobs. Since the recovery began, businesses? spending on employees has grown 2% as equipment and software spending has swelled 26%, according to the Commerce Department. A capital rebound that sharp and a labour rebound that slow have been recorded only once before ? after the 1982 recession.
With equipment prices dropping, and tax incentives to subsidise capital investments, these trends seem likely to continue.
?Firms are just responding to incentives,? said Dean Maki, chief US economist at Barclays Capital. ?And capital has gotten much cheaper relative to labor.?
Indeed, equipment and software prices have dipped 2.4% since the recovery began, thanks largely to foreign manufacturing. Labour costs, on the other hand, have risen 6.7%, according to the Labour Department. The rising compensation costs are driven in large part by costlier health care benefits, so those lucky workers who do have jobs do not exactly feel richer.