Industries afflicted with Baumol's Disease have slower productivity growth.

Incentive: The 50th Employee

by Elaine Schwartz    •    Apr 7, 2013    •    267 Views    •    TIME TO READ: 1 minute

The Affordable Care Act is doing what France has done for years. It has a 50 employee tipping point.

The Affordable Care Act says that businesses with 49 employees will not have a health insurance mandate. However, for those with 50 or more, no coverage could mean a $2,000 fine per full time worker (minus the first 30 workers). So the fine will be 20 workers x $2,000 = $40,000. There is more detail in the Kaiser Foundation infographic, below.

In France, worker #50 means that a firm needs to create worker councils, establish profit sharing, and report to employee representatives when firing people for economic reasons.

As a result, there are 2.4 times as many businesses in France with 49 employees as with 50. When a growing enterprise hits 49 workers, a typical entrepreneur starts a second company rather than expand beyond 50. Or, that person avoids hiring #50.

The Affordable Care Act’s Employer Mandate:

To start on January 1, 2014. From Kaiser Family Foundation.

To start on January 1, 2014. From Kaiser Family Foundation.

Are we creating the same incentives as France?

Sources and Resources: For an Affordable Care Act implementation timeline, 2010-2018, a brief and clear summary of the act’s provisions, and a more extensive infographic, do go here to the Kaiser Family Foundation website. It is excellent. To read further about France’s labor market rigidities, this Bloomberg article and this econlife post (which has been partially quoted above) have more details. Finally, complementing our facts, this economix blog from economist Casey Mulligan provides considerable insight.

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