CU study: policies cause of business uncertainty as grads enter work force

Posted by Tom Kalinski Founder RE/MAX of Boulder on Monday, May 13th, 2013 at 1:22pm.

The University of Colorado-Boulder handed out nearly 6,100 degrees the weekend of May 11 including 4,687 bachelor’s degrees, 903 master’s degrees, 171 law degrees and 494 doctoral degrees.

And while many of those graduates are likely hoping to find full-time employment in the near future, a CU study shows that they may have a tough time doing so.

National policies – not necessarily hiring and financial obstacles – have created business uncertainty that has prolonged the sluggish recovery of U.S. jobs, according to the study.

Business owners and managers are not sure about the yet-to-be-realized costs of policies such as health care, tax reform, and environmental cap and trade as regulations take shape and are implemented, according to the study’s lead author Sanjai Bhagat, a provost professor of finance at CU-Boulder’s Leeds School of Business.

If business uncertainty were to revert to levels that were observed in pre-recession 2005, corporate employment would increase by about 3.35 million jobs, Bhagat says.

“We’re not seeing a normal bounce back from the latest recession,” he adds. “On average, it takes about 24 months for the economy to regain prior employment benchmarks. In this case, about 60 months have elapsed and we’re still 3.2 million jobs short of where we were at the peak in 2007.”

Company access to capital is not the prevailing issue, despite popular belief, Bhagat says.

“Some of these corporations are sitting on hundreds of millions to billions of dollars of cash,” he says. “But they don’t know if they should be hiring more people, investing in other facets of their businesses like (research and development) and manufacturing plants, or just wait.”

Bhagat advises policymakers to focus on issues that would sooth business owners’ uncertainty.

 “In other words, a meeting of the minds in D.C. to offer clarification and timelines on things like health care costs, both corporate and personal tax rates, and carbon emission regulation could be helpful,” he says.

Tom Kalinski 
Owner and Founder
RE/MAX of Boulder

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