Kicking. Squealing.
A fascinating chart reprinted by Casey Mulligan at the NYT’s Economix blog:
The gap there at the 49-50 employee mark – Mulligan explains:
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.
The authors show how this pattern reflects deliberate efforts by employers to stay below the 50-employee threshold where several employment and accounting regulations take effect. For example, they note that 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. France also has regulations kicking in at employment levels of 10, 11, 20 and 25.
He adds:
But the United States has added some major regulations with its Affordable Care Act and its Dodd-Frank regulations. Beginning this time next year, for example, 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. Businesses with fewer than 26 employees may already be eligible for Affordable Care Act tax credits for providing health insurance, whereas larger businesses are not.
Perhaps we should thank the French for their heavy regulation, as it is already helping us account for the impact of regulation in the United States.
That chart uses a log-log scale. Most people do not understand what that means.
@The fourth doorman of the apocalypse:
The point of the chart is that the law has done something very strange and artificial to the size of business organizations. This is exactly what you would expect, and there it is, in black and white. No one has to understand what log-log means to see immediately and at a mere casual glance there is a giant break in the otherwise fairly smooth and continuous curve precisely at the 49-50 employee frontier, and that there’s also an obvious uptick from 47 to 49 which is at odds with the downward sloping trend.
You see this kind of thing all over the place – for example in means-test cut-offs for welfare benefits for the poor, and in the tax code. Elsewhere, the problem is “fixed” by long phase-ins and outs, and I’m kind of surprised they didn’t do that with the ACA. Of course, some things are by nature Boolean and discontinuous – you either have a committee or you don’t.
Very strange that the Times is publishing something that borders on or even passes the border of CrimeThink. Really, sainted regulations may stifle job creation? Whatever does that mean for the key value of regulations, namely my moral uplift?
peterike, you’re exaggerating. The idea that regulations may have deleterious economic effects is not crimethink to your typical NYT reader, though he probably still thinks the regulation is worth it on net. There are plenty of other ideas that NYT readers/writers actually would react to as if they were crimethink, so there’s no need to make your ideological opponents seem even more extreme than they are (on this issue).
Yes, this bubble is the reason I proposed a long time ago in my blog as a pro-employment measure the doubling of all constants in the administrative/legal code of the form—this regulation applies to all employers with more than X employees. You’d likely see a significant surge very quickly as profitable, but for marginal regulation, hires got done.
You’d sooner see the threshold numbers reduced, in order to “close the loophole for those cheaters”. Pressure to do so will increase, as more “revolutionary” small business owners publicly declare their intentions to cut staff & hours to the necessary levels.