I’m going to have to re-read Casey B. Mulligan’s post at City Journal about the economic consequences of the PPACA. I may disagree with his conclusions. I think it’s inescapably true that the PPACA will tend to push total compensation down for the reasons that Dr. Mulligan outlines in his post. But what will the other run-on effects be? I think it may tend to improve economic efficiency.
As a higher proportion of total compensation is paid in the form of wages rather than non-wage compensation, the advantage that non-wage compensation confers on some employers at the expense of others will tend to be eroded and economic efficiency will increase. Some of that efficiency may be captured by employees in the form of wages rather than employers in the form of profits. We can always dream, can’t we?
There was one thing that caught my eye:
The law defines a large employer as one with at least 50 full-time-equivalent employees in the calendar year prior to the one in which it failed to provide coverage.
I wish that the federal government in all its wonderful variety of forms would settle on a definition of “large business” that matches any sane intuitive definition of “large business”. Let’s do a little back of the envelope calculation. We’ll use round numbers to make things easier. If you multiply a median wage of $50,000 by 50, you get $2.5 million. Add 30% for non-wage compensation and it boosts your employment costs to $3.4 million. What to you want to use to estimate non-payroll expenses? You know, everything other than payroll costs? Two times? Three times? Let’s use two times or non-payroll expenses of $3.4 million. That gives us total expenses of $6.8 million. If your operating margin is 8% (something a lot of business would kill for) that gives you about $7.5 million. That’s a small business by the definition used in just about every state. If the non-payroll expenses are ten times payroll costs (unthinkable as far as I’m concerned), it would give you (assuming our unrealistic profits) of right around $38 million. That’s a medium sized business by just about any reckoning. Just a little perspective.
At any rate, read the whole thing. It might give you a little different perspective on the PPACA.