Another Dead Zone for Obamacare

I previously noted the employment Dead Zone effect for Obamacare, it will cause fewer wage settings, a broadening of the Dead Zone of unemployment and when the wage grows to positive income tax a large marginal tax increase for the low wage worker.

Now Barrons interviews WILLIAM DUNKELBERG, the chief economist with the National Federation of Independent Business. He sees the Dead Zone effect for small businesses that grow beyond the minimum number of employees for Obamacare exemptions.

Mish quotes from Barron's:

Just when a small business gets large enough to no longer be called "small" is arbitrary. The legislation sets the exemption bar at fewer than 50 employees. And it turns out that, based on Bureau of Labor Statistics figures, there were nearly 4.7 million such firms in the U.S. last year, 95% of all private-sector firms. This 95% employed just 31.2 million workers in 2009 (down from 33 million in '07), accounting for 29.4% of all private-sector employment. Not surprisingly, Congressional Budget Office figures show that a disproportionate share of these workers lack health insurance.

The legislation waits until 2014 before imposing stiff fines on firms with 50 or more employees that do not install a government-approved health insurance plan. If Dunkelberg is right, however, then rising costs and shortfalls in revenue could lower the cutoff to 20 employees, or even 10. At a cutoff of 10, for example, one million firms (out of the 4.7 million total), would no longer be exempt. But wherever the cutoff is set, consider how the rule could affect firm behavior.

Obamacare will be a nightmare as small firms try to navigate the cut off for exemptions.