Humans respond to incentives. Offer them something that will improve their life, and many will opt for it. Conversely, if a new law or rule creates difficulties, many will look for ways around it.
So it is with Obamacare.
More than a few flaws have been found in this massive "we have to pass the bill so we can find out what's in it" legislation. Now, however, we are finding out. We are also discovering how employers are dealing with the difficulties.
Welcome to the strange new world of small-business hiring under ObamaCare. The law requires firms with 50 or more "full-time equivalent workers" to offer health plans to employees who work more than 30 hours a week. (The law says "equivalent" because two 15 hour a week workers equal one full-time worker.) Employers that pass the 50-employee threshold and don't offer insurance face a $2,000 penalty for each uncovered worker beyond 30 employees. So by hiring the 50th worker, the firm pays a penalty on the previous 20 as well.
These employment cliffs are especially perverse economic incentives. Thousands of employers will face a $40,000 penalty if they dare expand and hire a 50th worker. The law is effectively a $2,000 tax on each additional hire after that, so to move to 60 workers costs $60,000.
A 2011 Hudson Institute study estimates that this insurance mandate will cost the franchise industry $6.4 billion and put 3.2 million jobs "at risk." The insurance mandate is so onerous for small firms that Stephen Caldeira, president of the International Franchise Association, predicts that "Many stores will have to cut worker hours out of necessity. It could be the difference between staying in business or going out of business." The franchise association says the average fast-food restaurant has profits of only about $50,000 to $100,000 and a margin of about 3.5%.
Democrats who thought they were doing workers a favor by mandating health coverage can't seem to understand that it doesn't help workers to give them health care if they can't get a full-time job that pays the rest of their bills.