Wednesday, October 16, 2013

"Employee-Free" businesses

"Employee-free" by 2023!

The logic for businesses is simple. If you have three employees working 40 hours per week they will produce 120 labor hours. Five employees working 24 hours per week also produce 120 labor hours. Employers must offer the three full-time employees health insurance or pay a penalty. They have no such obligation to the five part-time employees, making part-time employment less costly. Make something more expensive and employers will use less of it; make something less expensive and they will use more of it.
The quote above is from the CEO of CKE Restaurants (Hardee's/Carl's Jr.). He is refering to employers' responses to ObamaCare mandated health insurance for full-time workers (defined as those working more than 30 hours a week). The rational response to this increased cost is to lower workers' hours and divide the work among more (uninsured) workers.

The same applies to minimum wage laws, by the way. If I am paying someone $7.25 an hour to put address labels and stamps on my business mailings, and then Congress tells me that I have to pay them $15.00 an hour because that's the new Federal Minimum Wage, did Congress just double that employee's salary? No, it just put them out of work. I'll put the labels on myself or, better yet, pay my kids a penny an envelope to do the job.

No health insurance premiums for these workers.

What is not discussed by the Hardee's CEO is what is quietly going on in American business -- companies are looking for "employee-free" business models. If government regulations make it more and more expensive to employ labor, then the rational move is to replace labor with automation. You can already see this at Sheetz gas stations, where customers place their food orders through a touch screen (no human order taker required). Applebees and McDonald's are looking at the same systems.

Ah, the Law of Unintended Consequences! Give every worker a "living wage" and "free" health insurance and you end up with a permanent underclass of the chronically unemployed.

If you want to learn how to think clearly about such topics, I have found no better introduction than Hazlitt's Economics in One Lesson. From an Amazon reviewer: "The one lesson is simply this: economic planning should take into account the effects of economic policies on all groups, not just some groups, and what those effects will be in the long run, not just the short run. That's it. That's the lesson. Fallacious economic policies almost invariably seek to benefit one group at the expense of all others, or to bring about short-term benefits at the expense of long-term benefits."

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