This is Stupid

From the new bill signed by Obama today:

Under the new law, businesses that hire anyone unemployed for at least 60 days would be exempt from paying the 6.2 percent Social Security payroll tax through December. Employers also would get an additional $1,000 credit if new workers remain on the job a full year.

This is absurdly game-able.  How do I know?  Because as I read this here (I have not read the legislation) this is a ridiculous windfall for our company.  As a seasonal business, my current payroll is about 40 people.  Over the next two months, I will hire nearly 400 workers for the summer, most of whom have not been working over the winter as they are retired and just work a few months of the year.  Am I really not going to have to pay Social Security taxes on all these people?

And how is anyone going to administer this?  Are my payroll company and I going to have to figure out the employment status of all of our hires for the last 60 days to figure out what taxes to collect?  Does anyone in Congress even think about this stuff when they pass this garbage?

Update: ADP has more

Update #2: Here is my prediction, if they forgot about seasonal hiring  (again, I have not read the letter of the law yet).  This will be like the cash for clunkers program - in a month or two they will announce that they have used up the money they had allocated for the whole year.

  • As the administration goes, from your link:
    Any new hire must certify "by signed affidavit," under penalties of perjury, that he/she has "not been employed for more than 40 hours during the 60-day period ending on the date such individual begins such employment."

    I wonder if this will lead to discrimination against those who have been insufficiently unemployed.

  • Another "benefit" of this law is that it gives the government a chance to give thousands of people a job investigating whether these affidavits are actually true!

  • gn

    Wow, more legislation from people who've never run a business. Gameable in lots of fun ways.

    According to the ADP link you can't "replace" someone with a new hire and get the credit. Hmm.. I just create a new shell company, hire a bunch of new people and get the credit there, fire all my existing employees and outsource the work to the shell company. QED.

  • Charlie B

    No private-sector employer hires somebody solely because of a tax break. They may take advantage of the tax break, but the new employee had better make a difference on the bottom line.

    This is yet another generational wealth transfer. I assume the new employee is still earns Social Security credits that somebody's grand kids are going to make up when the employee starts collecting Social Security.

  • Many, many construction companies in the northern half of the country hire in the spring and layoff in the fall (except perhaps for a crew that may do indoor work.) I'd suggest that they sell tickets to watch the layoff process next fall.

    "If we lay off Mike this year, but keep Joe and move him indoors,..."

  • I wonder if this will lead to discrimination against those who have been insufficiently unemployed.

    It's our own fault for having the good luck or the right skills to remain employed.

    The intent is good. Like so many, many things the government does the unintended consequences will be unfortunate.

  • spiro

    As someone from an area with a strong agricultural sector, this looks like a windfall for them also. Although there are a few year-round ag employees, the size of the workforce definitely waxes/wanes with the seasons. The only problem is now they'll have to actually issue paychecks (instead of straight cash) and get ID #s for their employees.
    I guess it's fair though, it's not like there are any other govt subsidies for agriculture, right?

  • Mark

    Rush Limbaugh suggested it could actually encourage layoffs. You lay off your employees for 2 months and hire temps, then hire them back.

  • Every paving contractor that experiences winter just got a 6.2% reduction in labor costs for the jobs he bid one, two or three years ago. Figure $2 an hour minimum. The workers will put in 1500 hours minimum during this year's season. $3,000 apiece. For a contractor with 100 workers that is $300,000 direct to the bottom line.

    I'll bet they are ordering new cars for their wives and their girlfriends this afternoon. Now there's an economic stimulus!

  • jdt

    Someone who gets laid off tomorrow will be looking for work and will be less desirable than someone whos been toiling in unemployment for months.

    Do they really think its better to eliminate one slightly long-term unemployed than to prevent one?

    I guess the proper play is to collect unemployment for 60 days then go looking for work.

  • A Gummint Service Organization

    > This is Stupid

    Thank you. Glad we could be of help.

  • Kuntal

    Another kind of discrimination could be against people who HAVE BEEN unemployed. You have been unemployed for "only" 45 days? We will hire you, but you cannot start now, start 15 days later.

  • IgotBupkis

    > Do they really think its better to eliminate one slightly long-term unemployed than to prevent one?

    From the government's point of view, yeah. That guy who just got unemployed won't collect a check for two weeks, maybe longer if he's stupid/smart enough to not take his unemployment benefits right away.

    From the schlub's lone pov, it's probably better for him. He's probably exhausted his unemployment bennies and run through his excess cash. The other guy, if he has any brains, has been saving for this and has his full unemployment to help.

    Further, the longer-term guy is more likely to have given up searching hard, unlike the other one.

    From the societal PoV there's not a lot of difference, but from a personal one, yeah.

  • Scott Wickham

    The Purpose of the law is to GET you to hire people NOW before midterm elections to drive down unemployment.

    BEFORE the election. After they don't give a damn.