Tuesday, September 07, 2004

Unintended Consequences, again

Bush's accelerated depreciation may be hurting employment rather than helping if companies use it to buy systems that enhance productivity.
The rub is that such products, production and installation of which isn't particularly labor-intensive, are expressly designed to allow companies to operate with fewer—rather than more—employees. These productivity-enhancing solutions are supposed to pay for their expensive selves over time through reduced labor costs (read: fewer workers).

In theory, greater productivity is supposed to free up more resources for companies to invest, grow, and hire. But for the past few years, U.S. companies have proved to be remarkably shrewd about doing more with fewer—or the same number of—workers. And the temporary accelerated depreciation rule may have given companies an extra financial incentive to invest in these productivity boosters precisely at the time the administration was hoping they'd be creating new jobs.