EMPLOYERS' FINAGLING CUTS NEW JOB OPENINGS.

Byline: Gary M. Galles Local View

THE Labor Department's most recent report found that the unemployment rate rose to 6 percent in April, its highest level in nearly eight years.

While that is cause for concern (although it is biased upward by workers registering for unemployment to receive the recently approved 13 week extension of Sept. 11 benefits), its data also showed another interesting trend: There has been an increase in part-time and temporary jobs, and factory overtime is also increasing, at the same time that many are having trouble finding full-time jobs.

This unusual combination is partly due to understandable caution by employers about their future economic growth prospects. But the crowding out of new full-time jobs by increases in part-time jobs and overtime in the United States (reflected in all the hand-wringing about a possible ``jobless recovery'') is also the result of government interventions in the labor market.

Employers facing increased demand when they are producing at or near capacity with their current (though in many cases, reduced) labor force have traditionally chosen adding full-time workers over hiring temporaries or paying existing workers overtime.

With more training, familiarity with production processes and firm loyalty, new full-time workers have historically been more efficient than part-timers, as well as more efficient than the higher pay and reduced productivity of overtime.

This equation has been changed by the growth in fringe benefits, driven by their nontaxable status, regulatory mandates and collective bargaining.

The increasing fraction of compensation received as fringe benefits, primarily by full-time permanent workers, has substantially increased their cost to employers, particularly in response to potentially temporary increases in demand.

Legal developments have intensified this disadvantage to hiring regular staff.

The Americans With Disabilities Act; the threat of litigation claiming wrongful dismissal for race, sex or age discrimination or a hostile work environment; plant closing legislation; etc., have made dismissing a full-time employee almost prohibitively expensive.

These changes have increased the attractiveness of ``disposable'' employees (who can cost 40 percent less than regular full-time staff) and overtime, since they circumvent these costs of potential future cutbacks.

As a result, many firms, particularly those with substantial fringe benefits packages, often simply find new full-time workers too expensive to hire.

Part-time and leased workers, who receive few fringe benefits and are easy to fire, are being added instead in jobs requiring little firm-specific training. Overtime from existing staff is being used where firm-specific skill, experience or training is necessary because their fringe benefits (pensions, health insurance, etc.) are largely unaffected by the extra hours worked, existing workers do not require added training, and reducing output by cutting overtime in the future will not require layoffs.

In other words, the current trend to both part-time jobs and overtime, reducing the number of new full-time job openings, is caused largely by government policies that make it much more expensive to hire new full-timers.

Today's job market provides cause for concern. Many part-time workers would prefer full-time work they cannot get, at the same time that many other workers are working more hours of overtime.

But this does not reflect a labor market failure, demanding some new government policy ``fix.'' In fact, increased government mandates or regulations for full-time workers will just make regular full-time jobs scarcer.

The real solution to these problems is rather to rein in the government policies and mandates that cause these disincentive effects, and then leave employees and employers free to negotiate labor agreements that reflect what they want.