Wild that explanations of the tech job market like this are still being written without referencing the tax consequences of Section 174 changes.
The reality, in my opinion, the governments have made it so hard to start and maintain a business that the market is not liquid for employment anymore. It's not catastrophic, but rather dead (as not moving).
Here are the employment numbers: https://tradingeconomics.com/united-states/employed-persons
2019: 159M Employed out of 326.8M Population 2024: 161M Employed out of 335.8M Population
1.25% vs 2.75%
The business part is a no brainer. Especially when it’s a software business with no office space, inventory or utilities.
From https://stratechery.com/2023/buzzfeed-shutters-news-startups...
> Because the 2017 “Tax Cuts and Jobs Act” was passed via the reconciliation process (in order to avoid a filibuster), it had to be budget neutral after 10 years; one tactic used to accomplish this is to make future changes to the tax code that increase revenue, even though the bill’s drafters anticipate those changes will be rolled back before they are implemented.
You just said "numbers down, government bad"
What is the point? Analysis? This is like people on Fox just calling names.
Plus, this doesn't really explain Europe's tech sector dumping, since from a quick search this is entirely an American thing.
So maybe you're just as wrong as anyone else?
I don't think 174 is the entire story -- I do think interest rates play a significant part, for one thing. But it's definitely part of the story, and definitely plays into some level of Europe's tech woes.
It could explain part of Europe's dumping. If the hiring market in the US is weak, some of those displaced devs could work for European software businesses, at least on a contractor basis, because remote is a thing. I've done that. I'm not doing it now (I'm globally unemployed, ha) but I did do it in the past. Was quite nice actually, the European company I worked with actually paid almost immediately when invoiced, rather than than drag it out 30-60 days as is customary in the US.
The difficult bit is that there is very little available to folks who want concrete "answers" to the job market, life and success questions. There is simple, quality advice but it doesn't give answers and I've noticed people don't like them.
But all of that is irrelevant since these tax changes don’t actually increase tax collections. All they do is make it harder for a company whose product development and/or research is dependent more on human capital as opposed to physical assets, to start doing business.
It has no impact on established businesses (since their taxes will offset over a few years) and the only impact will be that more businesses are likely to fail before they become established than otherwise. Alternatively, more businesses are likely to outsource and offshore their human capital.
Even if the work that was benifitting was not “research” when deciding tax policy taxonomy is far less relevant than actual impact.
And unfortunately it looks like we’re on track to re-elect the people who brought us this atrocity in 2017.
Larger tax bills and a tightening on what roles/activities are deductible as R&E are likely what OP is pointing at with his comment.
To the best of my non-inside baseball research, Section 174 changes were simply one part of a package of revenue generating measures to offset the large tax cuts from the broader tax act they were a part of.
The changes came from The Tax Cuts & Jobs Act of 2017 that was introduced to the House of Representatives by Congressman Kevin Brady (R) Texas. The bill passed both houses of Congress along party lines. Then President Trump signed the bill into law. Section 174 changes did not take effect until 2021.
Will he lower interest rates?
Donald Trump, as a real estate guy, instinctively understands the power of lower interest rates and definitely lobbied hard for Jay Powell (whom he appointed) to lower interest rates in his first term. So if he gets elected again I expect we will see that sort of pressure applied again, the question is whether the Chairman would continue to chart their own course or not.
1: The truth of this story is, as always with economics, impossibly hard to measure. There was a strong movement from the 1960's into the 1990's to try and create independent central banks- this is where the Nobel Memorial Prize in Economics came from, among other things- but the evidence is such that the physicist in me recoils at the idea that this has been proven.
Interest rates will almost certainly get lower in the next term, regardless of who's in the White House.