Jobs: What Does It Cost to Add a Worker?

Jan. 25, 2011 -- There is a cacophony of voices shouting about jobs – politicians, traders, economists, business leaders all yammering on about needing more and what it'll take to get unemployment down.

With all the rhetoric, not many Americans know what it takes to fund a new job. What does it really cost to add a worker to a company's payroll?

Well, here it is:

$40,630.20

(BASIC WAGE; the average weekly earnings for a private sector worker according to the Bureau of Labor Statistics is $781.35 x 52 weeks)

+

$17,064.68 (BENEFIT and TAX COST; the BLS says that for every $1 in wages, employer costs for taxes and benefits are $0.42 )

=

$57,967.88

And this number doesn't include the cost of rent, telephone/internet, computer, training, etc. for the average worker – it's just the direct costs of employing someone. Experts say these other costs can add thousand of dollars more per year, depending on the industry and job requirements.(continued on next page)

What's All This Mean?

It's expensive to "add a job."

Now let's go the next step.

What does it cost to add enough new jobs to cut the unemployment rate to 6 percent, where we were in the middle of 2008?

Today we have 14.5 million unemployed folks in the US. To get to 6 percent unemployment we'd have to find work for 5.3 million of those unemployed people.

5,300,000

x $57,967.88

= $307.2 billion

To absorb just the average direct costs of these new workers, we would have to add 2.1 percent to the US gross domestic product. And that's not including the profits the private sector would require to justify adding the workers to their payrolls – we're not running a charity here, after all.

Talk about jobs is cheap. Adding a job is not.

Note: Data derived from the Bureau of Labor Statistics figures.