Investors Business Daily reports on how the Treasury Department is threatening private companies who lay off employees because of the costs imposed on them by Obamacare.
Excerpt:
In what may be considered an ObamaCare loyalty oath, the Treasury Department orders employers to attest that any employee layoffs are not due to its imposed costs under penalty of perjury.
The first rule of business is to stay in business, something which is accomplished by doing what government is incapable of doing — controlling costs and making a profit by giving customers a product or service they need or want.
ObamaCare is obviously a product neither business nor the individual wants, so coercion is necessary under penalty of law.
Enforced by the Internal Revenue Service, individuals must enroll in government-approved plans or be fined.
Individuals are not allowed, despite presidential promises, to keep the plans and doctors they like and can afford.
Instead, they must accept plans they don’t like and can’t afford, some getting subsidies extracted from other taxpayers or China. They must grin and bear their reduced health care choices and higher costs.
Even though ObamaCare’s employer mandate has once again been illegally and unconstitutionally extended by the president who would be king, business still faces ObamaCare’s punitive cost increases down the road and its own form of government coercion.
Layoffs are an unfortunate but sometimes necessary means for a business to control costs and stay in business.
On Monday, a Treasury Department unconcerned with the necessities of the free market said that businesses will need to “certify” that they are not shedding full-time workers simply to avoid the mandate and its costs.
Officials said employers will be told to sign a “self-attestation” on their tax forms affirming this, under penalty of perjury.
What happens when a government passes regulations that make it harder for employers to lay off workers if they are forced to? Well, companies stop hiring workers, and expand their operations elsewhere. That’s exactly what has happened in countries like France, where the government makes it nearly impossible to get rid of workers, even when circumstances warrant it. So the net effect of policies that reduce the freedom to hire/fire as needed is to raise unemployment.
Here’s the economist Aparna Mathur of the American Enterprise Institute to explain.
Excerpt:
Labor market regulations often take the form of employment protection rules that govern the hiring and firing of workers. These were originally introduced to enhance workers’ welfare; for instance, by reducing unfair dismissals. The same provisions that protect employees, however, translate into cost for employers, leading an employer to think twice (at least) before hiring a new employee.
Theoretical economic models have shown that, in general, the effect of such laws is to reduce job flows (broadly, the sum of jobs created and jobs destroyed). In my paper, I show that these reduced job flows could have negative effects on investments in education because they reduce the expected returns on a job search; and they lower the value of education as a signaling device.
Under rigid labor market regulations, employers have a stronger disincentive to create new jobs, so there are fewer available jobs on the market. As a result, one’s likelihood of earning a productive wage is reduced. Moreover, firings under a system of strong labor market regulations are less frequent than they would be otherwise, so even workers with jobs expect to face fewer opportunities to search for re-employment. As a result, they will have less use of education as a signaling device to secure their next job.
With flexible labor markets and higher job mobility, these conditions are reversed. Job flows are higher, leading to more vacancies per unemployed worker. This yields a higher expected return on a job search for educated workers since the likelihood of finding a job is higher. Further, workers are either fired or they quit more frequently (i.e., job destruction is higher), leading to a greater use (or need) of education as a signaling device.
Put simply, imagine a developing country with rigid labor markets leading to few vacancies. For a low-income worker, the cost of getting educated may outweigh the prospective benefits since the likelihood of finding a job in this scenario is fairly low. On the other hand, for the same worker, if the likelihood of finding a job goes up when labor market restrictions are removed, the incentive to invest in education may be higher since the returns to investing in this costly activity are higher. Countries such as France, Germany, and Italy, which consistently have strict labor regulations, would do well to heed these results (see figure). It is also true in general that developing countries have stricter labor regulations than the OECD economies.
All these regulations sound so good, but we have to think beyond stage one in order to see the real results of the happy-sounding speeches. These things are understood by economists, but we didn’t elect an economist.
WINTERY KNIGHT 