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Several years ago I heard an amusing story on NPR’s Planet Money program. The story described an Indian entrepreneur who, frustrated with India’s local political corruption and red tape, started a new business: Concierge Bribery. For a fee, he would seek out and pay off all of the sundry local officials whenever a local business needed something done. I thought how lucky we were that America had not yet descended to that level. I was deeply wrong. We, in fact, have had concierge bureaucracy managers for some time.
While it is generally a good maxim to never ascribe to mendacity that which can be explained by incompetence, normal logic seems rarely to apply to any of the corruption and rot stemming from Obamacare (and for the record, I refuse to call it “The Affordable Care Act”, or ACA). The act seems explicitly designed, among other things, as a tool to force a cartelization of the entire medical industry. We see this in the rapid demise of independent practices, as they close up shop and merge into large provider networks — effectively regional medical cartels. What we are not yet seeing, or rather noticing, on any scale is the very similar effect Obamacare (when coupled with the many other business strictures in place) is having on general employment itself.
The complexities of complying with the myriad kludges of federal, state, and local income taxes, payroll taxes, workers’ comp systems, and unemployment taxes have already driven most employers to contract with specialized firms for handling payroll. Only larger corporations have the budget to acquire and maintain the complicated accounting packages for running payrolls internally, so most smaller companies have, for years, offloaded this work on companies such as ADP or Paychex. With every added employee comes a new set of filings, and more potential for error. Just within my own company, we have have employees from two states and seven different local taxing jurisdictions, each of which has its own income tax, to be submitted on its own form, and by its own arbitrary deadlines. Say what you will about the virtues of federalism, each of those various towns, cities, and counties is a petty fiefdom unto itself, and all must be paid whether I actually do business there or not. Payroll services are effectively already the concierge bureaucracy managers. Now they are also changing into employment cartels.
The risks to an employer only grow should that employer choose to extend any benefits to employees, whether to meet some new arbitrary caprice of our rules (i.e. Obamacare), or to improve retention or morale. Just since the beginning of the Obamacare mandate, I have had a significant increase in the amount of paperwork I have to file each year, and in the number of mandatory notices and lectures I have to give my staff. Then there are the multiple workers’ comp filings I have to make every year (not to mention arguing with the state over how my employees are classified). Adding a 401k program could expose me to lawsuits for mismanagement if the market crashes, and the fees and audits would negate any upsides.
Adding to all of this is the greatest uncertainty: liability. Our legal structure is such that frivolous lawsuits are cheaper to file, and often less expensive to settle, than fighting them off, even when the entire lawsuit is without merit. The risk of lawsuits from one’s own employees is especially acute owing to whistleblower laws and other protections that make it especially difficult to gain redress even from completely unmerited lawsuits. An aggrieved employee can find a toehold in places unthinkable even a few years ago.
Realistically, if you are careful in your hiring and everyone acts like adults, the risks from these sorts of suits and annoyances are minimal. But I have learned the hard way that a particularly vicious and manipulative employee can stir anger and gossip like poison throughout an entire organization. And even long-trusted employees can change or harbor resentments for years, blindsiding everyone when that emotional dam cracks. Employers must be ever-vigilant about such things, laying groundwork against any damaging eventuality, no matter how slight the exposure seems at the moment.
In short, businesses in America run a gamut of risks to their well-being, and the laws and regulations today put them, almost by default, on the hook for actions that in another time would have fallen on individual actors. And just as Obamacare has driven the medical industry into cartels to cope with the bureaucracy, so now general employers now are consolidating their employee pools for protection. The payroll firms of old are now changing into something new: The Professional Employment Organization, or PEO.
The PEO is the logical extension to outsourcing payroll processing. The way a PEO works is simple: A business shifts its employees from direct employment to the PEO. The business then no longer directly employs anyone, but contracts its employees back from the PEO — for a fee, of course. In return, the PEO not only assumes the administration of payroll, but handling of benefits, the creation of HR policy, and all of the overhead thus entailed. The PEO, being effectively a national employer, can offer health and retirement benefits that my own little company cannot possibly offer, and liability concerns shift as well. The PEO is the ultimate concierge service in employment. However, PEOs are by their nature employment cartels, consolidating the employment pool into just a few firms.
I was informed by one PEO that PEOs in general have seen their employee pool grow nationwide by 15-20 percent per year since Obamacare was shoved down our throats (prior to that, their main markets were in the usual lefty bastions of California, New York, and Illinois). This is an alarming trend, not because the PEO concept is somehow wrong in itself, but because it is a sign that even small businesses are now economically unable to keep up with the burden of our government. A small business in America can no longer easily manage the regulations of Human Resources. Just as small medical practitioners have found themselves driven into large regional medical cartels, so now American businesses are finding themselves drawn to employment cartels.
Human beings are ingenious and creative. We find ways to get things done, even when the powers of bureaucracy weigh heavy. Think of Boss Mongo’s tales of procurement in the desert, or the Indian Concierge Bureaucracy service, or black markets in the former Warsaw Pact. We recognize in all of these stories that there is a troubling backstory — one of deep government corruption and inefficiency. We know that if goods, services, and people were truly free to flow, all this human resourcefulness and ingenuity could be directed toward something productive. PEOs are, of course, very clever too. But their rapid growth is another sign that our top-heavy government has grown beyond the point where anyone can navigate it or fend it off.
How can we continue to point to America as a land of opportunity when even the act of employing a person requires the employer join a cartel and hire a concierge bureaucrat manager? Such are the fruits of socialist central control.Published in