Perhaps the Law of Unintended Consequences makes an impact in no area more so than it does in government regulation. Take for instance the noble-minded effort to reform campaign finance regulation after Watergate. The attempt to get big money out of politics ended up creating a Byzantine labyrinth of money classifications that no only failed to get money out of politics, it ended up relieving political parties and candidates from any responsibility for the negative and cruel campaigns that big money now funds. When government passes regulation, people find ways to work around them to minimize their costs.
Today, the Washington Post discovers that the Law of Unintended C0nsequences applies to ObamaCare, too. Thanks to the massive costs added to hiring full-time workers, businesses now want to operate on cash-only relationships with labor:
The health-care law could prove to be a boon for temporary-staffing companies as employers outsource jobs to sidestep complex requirements for medical insurance.
But some experts say the Affordable Care Act’s exceptions for temporary employees could undercut the goal of expanding coverage to more American workers.
“That could lead to an increase in part-time workers” who lack insurance, said Susan N. Houseman, an economist at the Upjohn Institute for Employment Research who studies staffing companies. “You regulate something and people will always try to find a way around the regulation.”
No kidding? Who could have seen that coming? Only anyone who ever worked in the private sector, and/or anyone who could do math. Unfortunately, those two descriptions don’t apply to hardly anyone in the Obama administration, nor in the Democratic Congressional caucuses who managed to pass this bill without ever thinking about the perverse incentives it set up for the business sector.
Speaking of incentives, guess which part of the economy seems most attractive to investors these days?
Starting in January, employers with at least 50 workers must offer affordable coverage or pay a penalty. To stay under this limit, some are considering outsourcing jobs to specialists such as Kelly Services, Manpower, Robert Half and Randstad, whose stock prices have soared.
“We are already getting inquiries from our client base for companies in and around 50 [employees], asking us to help them understand this legislation, and to inquire as to how we might be helpful,” M. Keith Waddell, Robert Half’s president, told investors on a conference call a few weeks ago. “Our response is that we can legally help them remain under 50.”
And it’s not just the smaller businesses that are turning to temps:
The health law is also prompting larger organizations to use temp agencies. By requiring employer coverage only for those who put in at least 30 hours a week, the act appears to create an incentive for companies to do less with permanent workers and more with part-timers, which are the main focus of staffing agencies.
Even in this, larger corporations will have an advantage. From personal experience hiring temps for projects, I know that larger corporations negotiate for standing rates that give them lower costs than smaller competitors get from these temp agencies. For my first ever project at a large multinational corporation, I decided to conduct an open-bid process among the firm’s approved vendors for a temporary staff, against the advice of my amused boss who told me it would be a bigger headache than it was worth — and he turned out to be right, although I got a price below even our negotiated level in the end. As my boss told me, it cost me more in time than I saved, but it underscores the point that these kinds of interventions tend to favor larger firms, even indirectly and probably unintentionally.
Instead of building a strong and stable economy for the future, ObamaCare undermines the employer/employee relationship, the structure of full-time employment, and in doing so destroys the assumptions of costs in the public-subsidy program in the ACA on which the claims of budget neutrality were based. The worst part of this is that this outcome was entirely predictable, and in fact was predicted, but Democrats cared more about sticking Americans with a mandate than they did about undermining a fundamental relationship that is key to a stable economy.