Obamacare’s Job-Killer
Too little consideration has been given to the consequences of the employer mandate.

Manufacturing plant in Sterling Heights, Michigan


Jillian Kay Melchior

‘I would like to black those days out — does that tell you how bad they were?” says Carl Schanstra, owner of a small Illinois parts-assembly firm. During the recession, his sales dropped by around 50 percent, and Schanstra was forced to take a calculated risk: He downsized considerably, reworked his business strategy, and invested his life savings to tide the manufacturing company through the hard times.

“We laid off 20 people in one day,” Schanstra tells National Review Online. “That day sucked. We got rid of some of the high-level management that was not functioning correctly, as well as our low-level people. We cut and cut and cut. And as the owner of the company, I went without a paycheck for over three months, several times throughout that period. You get to compound on that company’s traumatic experiences, and then add that you don’t have any personal income as well.”

At first glance, it looks like Schanstra’s sacrifices paid off. Automation Systems Inc. is once again stable, and sales continue to rise. During the recession, the firm was housed in a leaky old building with a gravel loading dock and tarps aplenty to protect equipment when it rained. Three months ago, Schanstra was able to move into a much bigger, light-industrial new building.

But the company now faces a new problem because of the Obama health law. Automation Systems Inc. has expanded to include 37 employees today, and Schanstra says he wants to hire more — maybe as many as 200 or 300 in the next 10 to 15 years. But once the business crosses the 50-employee threshold, it will have to pay $40,000 in penalties, plus $2,000 for each additional employee. That’s because of the so-called employer mandate, a fee imposed on businesses that get too big without providing health care the federal government deems acceptable.

“The government has made it clear with the health-care law that the incentive is to have companies under 25 people, where we can get tax breaks,” Schanstra says. “The mid-range companies with the labor of 25 to 60 people — those companies are going to be impacted by this dramatically.”

Between 2007 and 2010, the U.S. lost 27,409 manufacturing firms, according to data from the Census Bureau, most of the losses presumably occurring during the recession. At its low point in June 2009, American manufacturing production was down about 21 percent from what it had been in December 2007. The manufacturing sector became a symbol for everything that had gone wrong: Why can’t the U.S. make things like it used to? Is the U.S. losing its global edge? Factory jobs were America’s hottest export, as the story went, and furrowed faces personified the trend.

President Obama took up the cause, setting a goal to double U.S. exports by 2015 and to create a million new American manufacturing jobs in the process. Early in the stimulus, politicians on the left pushed for federal aid and Buy America clauses. Most neglected to mention, of course, the regulatory burden and union wrangling that have made these companies less competitive than their global counterparts.