3:00pm

Mon December 26, 2011
Economy

What's Holding Back One 'Job Creator'? Not Taxes

Originally published on Tue December 27, 2011 8:53 am

There aren't many people on the broad Kansas prairie, but there is industry.

At G.L. Huyett, boxy machines jammed into a big metal building grind steel into heavy transmission parts.

"We're a supplier of last resort," says Tim O'Keeffe, who owns the company. If you have disruptions in the supply chain and someone can't meet a shipping time, he says, G.L. Huyett can step in.

It may sound marginal, but it's not: About 100 people work here doing manufacturing, selling and shipping. That's up from just four employees 20 years ago. Longtime employee Wayne Arthur works long hours to keep up with demand.

"It's been 10-hour days and half-days on Saturdays," he says. "And that's been since, probably, April?"

Record sales are earning O'Keeffe a bundle. Under a plan proposed by Democrats, he'd have to pay a surtax on income over $1 million.

Republicans have slammed the so-called "millionaires surtax," saying it would hit job creators. An NPR search earlier this month for a job creator who makes that kind of money and opposes the surtax idea came up blank. Senate Majority Leader Harry Reid called such "millionaire job creators" "unicorns" — hard to find and, in fact, nonexistent.

Not so, says O'Keeffe. "I am a unicorn."

Because the small business is set up as a subchapter-S corporation, all the company's profits are counted as income for the owner. O'Keeffe says the surtax would hurt his business more than his personal bank account. It would cut into his profits, which he says he needs to invest in order to expand and stay ahead of the competition.

But it is not taxes, or even the threat of them, that stops O'Keeffe from hiring and filling a new building. It's something else.

"We've got the space, we have equipment, we've got the cash, we've got the customers, we have the product," he says. "We have everything we need — except the people."

He can create jobs, but he can't fill them.

Barriers To Hiring

There are two issues here: For one, the company is picky, and O'Keeffe admits it's not the easiest place to work; he expects a lot from his employees. But the main problem, he says, is location. No amount of recruiting seems sufficient to get people to move out to Minneapolis, Kan., population 2,000.

Patrick Arvelo, a teenager sitting in a barbershop in downtown Minneapolis, says it is friendly, but he plans to leave right after graduation.

"I mean, there's just not a lot of people to meet, really," he says. "You're kind of stuck with the same people."

O'Keeffe understands why potential employees might miss city life, but not why they won't follow work as urgently as Americans did in the Great Depression.

"When I see the state of Michigan with unemployment rates north of 10 percent, I don't understand why those people, just like Tom Joad did in the Dirty '30s, jump in the car, throw Grandma on the roof, drive to Kansas and work for a productive, 100-year-old company like G.L. Huyett," he says, referencing John Steinbeck's The Grapes of Wrath.

Americans Staying Put

Americans are not moving like they used to. The mobility rate now is the lowest on record.

"We're really just stuck, I guess you can say," Bill Frey, a demographer at the Brookings Institution, says.

Frey says Americans are digging in, even where jobs are scarce.

"In fact, Michigan is no longer losing population," he says. "Now that's after several years of having some outmigration. You could make the case there that the people who wanted to leave have already left, and the rest of them are happy to stay there and ride it out."

That's bad news for G.L. Huyett — and potentially for Minneapolis, Kan. O'Keeffe says if he can't crack this mobility problem, he's going to have to take at least part of his job-creation machine someplace else.

Copyright 2013 KCUR-FM. To see more, visit http://www.kcur.org/.

Transcript

ROBERT SIEGEL, HOST:

Late last week, Majority Leader Harry Reid hinted that he might revive the push for a millionaire's surtax. Republicans argue it would hit small business owners particularly hard and could stifle job creation. Well, the next time the surtax could come up is when lawmakers start negotiating over the extension of the yearlong payroll tax cut early next year. Frank Morris of member station KCUR went to Minneapolis, Kansas, to talk with one small-business owner who says the surtax would impede his ability to invest in the expansion of his business, but that is not his biggest concern.

FRANK MORRIS, BYLINE: There aren't many people out on the broad Kansas prairie, but there is industry.

(SOUNDBITE OF MACHINERY)

MORRIS: Here at G.L. Huyett, boxy machines jammed into a big metal building, grind steel into heavy transmission parts.

TIM O'KEEFE: Very odd ball, think very big, very little, unusual materials.

MORRIS: Tim O'Keefe runs and owns this company.

O'KEEFE: We're a supplier of last resort. So you have disruptions in the supply chain, someone can't meet a shipping time.

MORRIS: May sound marginal, but it's not. About 100 people work here, manufacturing, selling and shipping. That's up from just four employees 20 years ago. And Wayne Arthur here toils long hours to keep up with demand.

WAYNE ARTHUR: It's been 10-hour days, and half days on Saturdays, and that's been since probably April.

MORRIS: Record sales are earning Tim O'Keefe a bundle. He'd have to pay the surtax on income over a million dollars that Democrats have proposed. Earlier this month, NPR searched for someone who makes that kind of money, creates jobs, and doesn't like the surtax idea. When it came up blank, Senate Majority leader, Harry Reid called such millionaire job creators unicorns - hard to find, and in fact, nonexistent. Well...

TIM O'KEEFE: I am a unicorn. What we have here in front of us is our 2010 corporate tax return, and you can see that we're a subchapter S corporation as well as my own personal income tax return.

MORRIS: Subchapter S corporation, that means that all the company's profits are counted as income for the owner. It's a common small business set up. O'Keefe says the surtax would hurt his business more than his personal bank account. It would cut into his profits, which he says he needs to invest in order to expand and stay ahead of the competition.

(SOUNDBITE OF DOOR CLOSING)

O'KEEFE: This is my Unicorn Mobile. It's an F-150 pickup with 231,000 miles on it.

MORRIS: O'Keefe takes me to another building, a big metal one across town. It's freshly refurbished, but mostly empty.

O'KEEFE: So, this, this is our future.

MORRIS: But it's not taxes or even the threat of them that stops O'Keefe from hiring and filling this building.

O'KEEFE: We've got the space, we have equipment, we have the cash, we have the customers, we have the products. We have everything we need, except the people.

MORRIS: He can create jobs, but he can't fill them. There are two issues here. For one, the company is picky, and O'Keefe admits not the easiest place to work. They expect a lot from their employees. But the main problem he says is location. No amount of recruiting seems sufficient to get enough people to move out to Minneapolis, Kansas, population 2,017.

PATRICK ARVELO: Small town. Like, I mean, there's just not a lot of people to meet really. I mean, you're kind of stuck with the same people.

MORRIS: Patrick Arvelo, a teenager sitting in the barbershop downtown, says it's friendly and comfortable, but he plans to leave right after graduation. Tim O'Keefe understands why potential employees might miss city life, but not why they won't follow work as urgently as Americans did in the Great Depression.

O'KEEFE: When I see the state of Michigan with unemployment rates north of 10 percent, I don't understand why those people, just like Tom Joad did in the Dirty Thirties, get in a car, throw grandma on the roof, and drive to Kansas and work for a productive, 100-year-old company like G.L. Huyett.

MORRIS: But Americans are not moving like they use to. The mobility rate is the lowest on record.

BILL FREY: We're really just stuck.

MORRIS: Bill Frey with the Brookings Institution says Americans are digging in, even where jobs are scarce.

FREY: In fact, Michigan is no longer losing population. Now, that's after several years of having some out-migration. You could make the case there that the people who wanted to leave have already left, and the rest of them are happy to sort of stay there and ride it out.

MORRIS: Bad news for G.L. Huyett and potentially for Minneapolis, Kansas. O'Keefe says if he can't crack this mobility problem he's going to have to take at least part of his job creation machine someplace else. For NPR News, I'm Frank Morris. Transcript provided by NPR, Copyright NPR.