17.9.03

ENCOURAGING SMALL BUSINESS DEVELOPMENT? Boots and Sabers is unimpressed with a new California mandate on businesses with 200 or more workers to either subsidize health insurance or pay into a state insurance fund. Such mandates provide two kinds of incentives. One, emergent businesses might strive to employ fewer workers than the threshold at which the mandate kicks in. Two, businesses might be less willing to hire additional workers and incur the large startup costs implicit in their benefit packages. Thus, as business expands, employers rely on overtime rather than on hiring additional workers. (David Smyth and I found some evidence for this phenomenon in automobile manufacturing, it's in the February 1991 Review of Economics and Statistics if you're curious.)

Things that make you go hmmm.... "jobless recovery," outsourcing and reliance on consultants, rising productivity with only slow increase in hiring, is there any evidence of lengthening working hours?

UPDATE: Do you hear an echo? Note Econ Log's September 18 discussion question.

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