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Reality: ‘Employers’ Have Been Priced Out

by Karl Denninger, Market Ticker:

Folks, I want you to read this again.

Specifically:

We have an opiod epidemic in this country in no small part because of the loss of jobs available to blue-collar workers — people who are not rocket scientists; people with no hope, no future and no job prospects often turn to intoxication. There’s a lot of people in this country facing this situation today; most people fall under the “average” area of the bell curve when it comes to intelligence. Their jobs went overseas or simply disappeared not only because of bad trade deals but because the medical system got parasitic to the point that it now consumes nearly one dollar in five in the United States. Laws such as ERISA, EMTALA and similar anti-discrimination statutes along with this parasitic sector of our economy mean that a small business offering health coverage as a benefit will be instantly bankrupted by one person who gets hired and has a $100,000/year chronic condition, and the owner of said business is forced by law to conspire with the ill applicant that comes in his door seeking work to screw his other employees.

The result? You’re nuts to hire your first employee and you’re definitely nuts to violate any of the thresholds that trigger various requirements in laws when it comes to benefit packages and similar.

One-person businesses are great but they need to grow into 5, 10, 20 and 50 person businesses for the United States to be great again.

They can’t under the present system because just one event completely out of the owner’s control destroys everything he or she has built, it is trivial for anyone who has such a condition to target said company and if they do there is nothing that either the employer or other employees can do about it.

Do you think this applies only to small firms?

If you do then please explain why we have an unemployment rate under 5% but wages are not rising rapidly.

Remember this folks, as it’s the first and most-basic law of economic balance: Supply and demand are inextricably linked; if there is demand, and insufficient supply price will rise until equilibrium is found.

Employment is an auction. The employer “bids” $X/hour or year and the employee “offers” $Y. Only if there is a meeting of the minds does a transaction take place.

If the labor market is “tight” then wages will rise rapidly until it is in equilibrium.

That hasn’t happened, and there are only two reasons it hasn’t: (1) You’re being lied to and the unemployment rate isn’t under 5% or (2) the employer has no more money with which to bid irrespective of the tightness of labor supply.

In other words either the statistics are a lie or the people who would hire can’t offer more because they are unable to pass through any more cost to their customers — they have determined that their customers cannot pay.

Remember that the employer has to look at not only his fixed costs but also his contingent costs. Remember too that “mandatory” health insurance imposed a large contingent cost on employers that didn’t appear to be there right up until someone who has a pre-existing condition shows up and wants to be hired. Remember that as soon as that happens it screws everyone who already works there and what’s worse the employer is forced to conspire with the applicant since (1) he can’t ask about said condition and (2) if he figures it out he can’t discriminate either or he will get sued and lose.

There weren’t all that many $70,000/year surprises in 1995. Today there are hundreds if not thousands of them and there are many more that are $10, 20 or $30,000/year surprises including some that force you to basically double-staff positions due to people’s “disabilities” that become “manifest” the day someone goes on your full-time staff.

Health “insurance” and “disability” related items are not the only place this comes into play but boy is it a big one. I have not only a product you’ve heard about in these pages before (HomeDaemon) that is quite possibly a many-million dollar a year business but I also have a cute device I’ve invented that I believe is patentable and intend to file a provisional on within a few weeks (yes, before I tell you what it is or how and why it works….) I’m willing to sell either but I will not set up a company to retail either one for the simple reason that to do so in scale you need more than one person and I’m not hiring anyone so long as I can be financially destroyed by the above horse****.

Don’t even bother trying to tell me that I’m in some sort of la-la land on this because I not only know I’m not from my past executive experience as a CEO I’ve had enough first-hand reports of it in the present tense, with details, to know it’s far worse now than then.

When I ran MCSNet it was bad enough — we offered health insurance, we had a universal “take rate” among our full-time staff but the cost to the company varied by a factor nearly 10:1 from the most-expensive employee to the leas.

That was 20 years ago.

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