business news in context, analysis with attitude

Content Guy’s Note: Stories in this section are, in my estimation, important and relevant to business. However, they are relegated to this slot because some MNB readers have made clear that they prefer a politics-free MNB; I can't do that because sometimes the news calls out for coverage and commentary, but at least I can make it easy for folks to skip it if they so desire.

• The Washington Post reports on a new study from researchers at Duke University and Grinnell College suggesting that last year’s $300 billion business tax break, which was “pitched as a way to boost hiring and wages,” instead only had “a modest effect on employment, no effect on wages and probably has accelerated the rate at which companies are able to replace workers with machines.”

Here’s why. The story notes that “the tax break in question, known as bonus depreciation, allows businesses to take larger upfront write-offs on the depreciation, or expected wear and tear, of newly purchased equipment … Bonus depreciation is often pitched as a way to spur business investment, which in turn will create jobs and raise wages.”

The problem is that, as the Post writes, “The tax break made it cheaper for companies to invest in equipment, such as automated checkout machines, that replaces workers … The paper’s results strongly suggest that, on net, businesses’ equipment investments aren’t helping workers become more productive but rather replacing the workers entirely. Because the cost of investing in new equipment is reduced by the bonus depreciation tax break, it makes it more affordable for businesses to shift to new production technologies that rely on machines rather than human labor.”
KC's View: