Impact of ObamaCare on Business: Lessons from France
Beginning this time next year…the Affordable Care Act will put new requirements on businesses with 50 or more full-time employees, whereas businesses with 49 or fewer employees will be exempt…[Similarly,] French companies employing 50 or more workers are, among other things, obligated “to establish a committee on health, safety and working conditions and train its members,” whereas companies with 49 employees are not…
The chart below, reproduced from their paper using data on employers in France, shows the number of employers of various sizes…
Luis Garicano, Claire Lelarge and John Van Reenen, “Firm Size Distortions and the Productivity Distribution: Evidence From France.”
The chart shows a couple of odd patterns at the 50-employee mark. First, there are sharply fewer employers (by more than a factor of two) with exactly 50 employees than with exactly 49 employees. Second, although the number of companies usually falls with the number of employees, there are actually more employers with 49 employees than with 45 employees.
Source: Casey Milligan.
That graph is ominous.
This is very interesting. Thanks for posting it.
If the cost of employing 51 workers (as opposed to 50 or under) is much higher, many firms will respond by employing no more than 50 workers. This may involve firms not expanding beyond 50 workers; or some firms firing a few workers. It may even evolve as smaller firms being more competitive than larger firms. But over time it will happen.
“We show how the regulation creates welfare losses by:
(i) allocating too little employment to more productive firms who choose to be just below the regulatory threshold
(ii)allocating too little employment to more productive firms because they bear the implicit labor tax (whereas small firms do not)
(iii) through reducing equilibrium wages (due to some tax incidence falling on workers)this encourages too many individuals to become small entrepreneurs rather than working as employees for more productive entrepreneurs.”
Very interesting graph. I wonder what the reason for the 49-45 employee discrepency?
Dunno.. the study doesn’t quite account for the 45-49 difference either. Other than saying that some of their production coefficients vary at 60.. I know we’re expecting huge increases in part-time employment, so maybe that’s why?
Well this should get very interesting very quickly…
The discrepancy in the 45-49 range is due to the differences in marginal utility and average utility. The companies who have 49 workers are companies who would probably hire additional workers if they could, but due to the discontinuity of the marginal cost, cannot breach 50 employees without losing money.