Unintended Consequences of Regulators


It seems to me that post-heathcare deform,  life for companies seems to be coming down to circumvention.

Dealing with bureaucrats has unfortunately become a game of the workaround for so many companies and individuals.  Its too bad really that small companies now have to do what they have to do in order to continue to stay in business.  As regulations get worse, the result will not be the paradise the Left spouts but rather the reality of what happens when people like this get in to power.  The Left will be “shocked” and will say things like “it was an unexpected turn of events” but nevertheless, talent and capital just don’t sit around ready to be abused.

Two things stand out:

1. THE 50 EMPLOYEE THRESHOLD.

I used to live in Italy and I remember across Northern Italy in particular there seemed to be tons of little companies all doing the production of one part of a final product (eyeglasses comes to mind).  Each company had less than (I think the number was) 17 employees.  Why?  Because I recall that when a company had grown over a certain amount of employees it had to start providing all kinds of social benefits to the employees and that made it not cost competitive to produce the goods.

So the Italian solution was to not have one company with 200 employees but rather to have several smaller companies with less than 17 employees.  Each smaller company could manufacture the part of the product (the glasses) that it needed to make, and ship the pieces to a final assembly company to put it all together.

The product was made, the company(ies) stayed in business, the product was shipped, and people stayed employed.  The intended result put out there by the Italian government was never achieved.  The same is going to happen in the USA with this mess where I bet we start seeing companies choosing to stay under 50 employees (or choosing to get to under 50 employees).

This will result in either higher unemployment, or simply more smaller companies and the money (big money in some cases) used on this is money that can’t be put to work growing.

2. THE CLASSIFICATION OF THE WORKFORCE.

It could very well be that we start seeing companies change the sort of people they hire.  Instead of hiring employees, companies could (and probably will) start to hire more contractors.  These would be the same exact people only the companies will say to the talent that they’d like to bring on “we want you in our work force and we’re willing to pay you for your brains, skills, contacts, knowledge, and ability, but we’d like to interact with you as a self-employed individual instead of as an employee.”

Hey why not?  Millions of individuals all across the USA could simply set up an LLC (Joe Blow, LLC) with a single member (themselves) which then simply flows through to their own tax return.  At that point some company can simply contract Joe Blow, LLC and many other similar LLCs to simply do business together.

Each company pays each LLC without any tax-withholding and each LLC is responsible to pay their own taxes quarterly – only this time each LLC gets to deduct many expenses that they otherwise would not be able to deduct as an employee.  Expenses such as mileage and….. healthcare expenses.  It would put the responsiblity back on the individual to purchase they’re own health insurance 100% detached from employment – just like their auto insurance and their homeowners insurance, and their life insurance, and any other form of insurance.

This actually would be a grand solution for individuals and companies all across the USA.  Why not?  I’d be willing to be that with tens of millions fewer employees and tens of millions more LLC contractors, there will be some entrepreneurial person out there that will find a way to set up an exchange where self-employed individuals will then be able to purchase good health care policies at much better rates by pooling their numbers in the market.

And health care insurance companies then wouldn’t be forced to insure the equivalent of a car wreck only after it happens – which is not insurance, but wealth redistribution.

My only conclusion is that the Left is not oblivious to the realities of physics and that therefore the moves they’re making can only be deliberate.

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