Wednesday, September 16, 2009

Mandates and more mandates


I've discussed the onerous mandates Obamacare would impose on insurance companies and individuals, but there is another mandate which it would impose on employers. Companies with a payroll larger than $250,000 would be required to either pay most of the cost of medical insurance for their full-time employees or pay a payroll tax of between two and eight percent. The minimum contribution is 72.5% of the premiums for individuals or 65% for an entire family.

Before you get all excited that they are going to stick it to the man, stop and think about the unintended consequences of this mandate.

Most larger companies already provide medical insurance for their full-time employees. The market demands it to attract the kind of people they need to run a successful business. The companies which will be hit by this are the small to midsize companies. Most any company with more than ten employees will hit the $250,000 threshold. According to the Census Bureau, there are about 1.15 million companies with more than ten employees and less than 100, and those companies employ 29 million people. Another 16.8 million people work for mid-sized companies with more than 100 employees but less than 500. A million companies with between 5 and 9 employees currently employ 6.8 million people. Some of those companies would be affected by the mandate and some would be under the threshold. Together these companies employ about 40% of America's workforce.

According to the recent employment reports, 9.7% of the workforce is currently unemployed, and 16.8 are unemployed or underemployed. There are 14.9 million people looking for Joe Biden's favorite little three-letter word: jobs.

Now imagine that you are running a small business with between 10 and 100 employees. Many companies like yours have gone out of business in the past year, and although business has been slow, you've cut back on expenses and managed to stay afloat. You'd like to start to expand again and hire some more people. That's not only good for you and your business, it's got to happen if America is going to get out of this slump and bring employment rates back up. But now you hear that the government is going to require that you provide medical insurance for your employees. That is going to eat up the small amount of spare money you had, and even that won't be enough. Hiring more people is no longer an option. Most likely you will need to lay off more people to pay for this new mandate. Some small companies will simply close shop. They are already right on the edge, and this will push them firmly into insolvency. Others will transition their employees from full time to part time to avoid the mandate. Any chance of reducing the unemployment rate will go out the window.

It is easy to cheer for the evil corporations getting what's coming to them, but that won't be quite so sweet when instead of free health care you don't have a job anymore. When that happens, try eating your hope and change.

2 comments:

The Donald said...

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I gotta get in now on this ground floor opportunity. The offering is only $8.8 billion, and is only available while supplies last.

http://www.buycaliforniabonds.com/bcb/rans/offering.asp

Guess their (CA's) garage sale and bake sale didn't raise enough revenue, and the guy down at the pawn shop wouldn't extend them any more credit...

Don Dodson said...

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