Friday, March 6, 2009

Another Mandate from Obama

Buried in the Obama budget among other nightmares is a requirement that all businesses with ten or more employees are mandated to provide an automatic enrollment program for employees into a retirement savings plan. Employees can choose to opt out. Businesses cannot opt out. One more reason not to have employees -- brought to you by the Obama budget. I am not sure that you really need any more reasons, given the rest of the Obama budget, but what the heck, maybe you were still foolishly thinking of employing some one. Think again.

If you were considering hiring that tenth employee, you might want to give that idea a little more thought. If you have twelve folks on the payroll, I would take a hard look at all twelve and see if you can't get that number down to nine. Nine is kind of a neat number in this context. I'm willing to predict that the number of firms with nine employees is the only size firm that will grow in the Obama years. There won't be many firms with ten or eleven employees...that's for sure!

Of course, for companies, that set up such a program, whatever expenses they have at the margin will simply lower their effective demand for labor. Employers look at the total costs of employees. If you're going to mandate certain costs, then employers will factor that in and adjust worker's pay accordingly. At first employers will simply adjust down their workforce (that's a polite way of saying they will fire people). Then, later, they will hire people at a wage that is substantially lower than what they would have paid before the mandate. Given all the mandates that have been added to the cost of having employees (and the enhanced possibility of litigation), the take home pay of employees has fallen over the years while the costs to employers has risen. This trend will only get worse with more mandates.

Card check, of course, is the next stage. Why should employees have any say in whether or not a union represents them? It's none of their business. Obama knows, because some Harvard Law professor told him, that employees are better off with a union. The steelworkers and autoworkers can vouch for that...the few that still have jobs. But, there is certainly no reason to let employees make the decision. What do they know?

I think the plan here is that the US is tired of being second rate to Europe in percentage unemployment. After all, we have traditionally half the level of unemployment of the typical Western European country. Why not catch up with them? I think Obama is probably going to be successful in this endeavor. He's half way there already. Maybe that's why Obama is always smiling when the subject of unemployment comes up.

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