Health Insurance, Small Business And Jobs Redux

The recent news of the economy's extremely anemic jobs picture, augmented by a recent report in U.S. News here http://news.yahoo.com/why-small-businesses-arent-fueling-job-creation-recovery-143335096.html, sounding the alarm regarding small business's inability to play its traditional role in generating the vast majority of new jobs powering the economy, reminded me of this blog entry of mine from over a year ago.

You can't have "economic recovery," or "economic development," without a small business recovery.


Health Insurance, Small Businesses, And Jobs...Why The Geniuses In DC Better Hope They Get It Right


Politicians like to deal with issues in isolation. It makes it somewhat easier to ignore the potential downstream consequences of their actions. So when advocates attempt to tie the cost of health care to job creation, politicians like to dismiss such concerns as "muddying the waters."

Of course, they're not alone. During the years I served as COSE's Executive Director (waaay back when the membership was growing by an average of 1000 companies per year, net of losses...which hasn't occurred since...well, since I left), some corporate godfather would ask, during a meeting of the Chamber's Board, "What does helping small businesses get discounts on health insurance have to do with economic development?"

Here's an answer, for politicians and corporate oligarchs alike.

It's by now an article of faith that nearly 80% of the new jobs created in our economy over any given period are created by small businesses. As Cleveland emerged from the recession of the mid-1980's, independent research showed that nearly all the jobs being created in the local economy were produced by small companies.

A survey of Greater Cleveland's economy versus those of a few "competitor cities," showed that, while Cleveland's economy was competitive with these other cities from a wage standpoint, Cleveland was at a labor cost disadvantage compared to those other cities. The reasons were non-wage labor costs...particularly the costs of health insurance and workers compensation.

So, our thinking went, if small businesses are creating the vast majority of new jobs, and they're at a labor cost disadvantage because health care and workers comp costs were high, then working hard to reduce health insurance and workers compensation costs would reduce the cost of creating new jobs

That's what led to a COSE health plan which reduced members' costs by 30%, and to our campaign to create an association-based workers comp program which reduced members' costs by as much as 80 percent.

Reduce the cost of labor, and you reduce an important barrier to job creation among small businesses, collectively, the country's job-generating machine.

Why is this important today?

Well, in the white noise surrounding the health care reform debate, a critical piece of research from the Bureau Of Labor Statistics showed that, between 1999 and 2009, the U.S. economy created virtually NO new jobs...almost zero...even as the U.S. population grew by 21 million people.

Net new population growth of 21 million, net new job growth of zero...this is a recipe for economic catastrophe.

Tax credits for job creation will not work if the cost of creating a new job is increasing every year, both from direct taxation (like payroll taxes) and indirect taxation, such as increases in health insurance premiums.

This is something I guarantee Our Friends In Congress are NOT thinking seriously about as they consider health insurance reform.

Despite public pronouncements, I still see nothing in the massive reform bill bumping and stumbling its way along the legislative process which even suggests reductions in the rapid increases in health insurance premiums for small businesses; in fact, most elements of health insurance reform seem destined to ADD to the hyperinflation of health insurance premiums.

This is an issue that small businesses and the people who supposedly advocate for them should be discussing at every opportunity. There is a correlation between the cost of creating jobs and job creation. Reduce the cost of job creation and, as if, by magic, jobs will grow. Increase labor costs, and job creation stops...or goes backward...among the primary job-growth engine, the country's small companies.

I'd really, really like to hear some acknowledgment on the part of Our Friends In Congress and The White House that they really get this idea. But I haven't. Because they don't.