Mandates could cause irreversible harm

Recently, increasing attention has been paid to Apple’s manufacturing operations overseas -- the company now make almost all of its products outside of the United States. It is inspiring to see innovators such as the late Steve Jobs create an incredible business success story. However, Apple’s offshore factories also highlight the effects government mandates can have on a company’s decision to “outsource” part of their operations and hire workers in other countries as opposed to here in the U.S. 

Unlike Apple, many businesses are unable to move overseas to cut costs, and still choose to create jobs within our borders. We must consider new ways to treat these truly local American businesses that directly serve consumers. Imposing costly mandates on these companies will not drive them offshore, but out of business altogether. Unfortunately, President Obama’s health care law will do just that.

We are thinking of the men and women who took a risk to start, build, and staff the millions of service industry establishments across this nation. From hotels and motels, to restaurants and retail stores, these businesses and their workers are punished by mandates because they provide services directly to U.S. consumers -- something that cannot be “offshored” to reduce costs. Neither a good night’s sleep for a weary traveler nor a hot cup of coffee on the way to work can be imported.

According to recent reports, Apple earned a profit per employee of over $400,000 last year. Profit per employee, or PPE, is factored by dividing net profit by total number of employees. This is a validated metric that highlights differences in business models and a company’s ability to absorb certain mandates. Many technology, pharmaceutical, financial services, and other sectors earn PPEs of over $100,000, while here in the U.S. restaurant, retail and other service industry businesses are lucky to manage a PPE of more than $2,500. 

Yet in the past when the government has considered the impact legislation has on what we call “small business,” we use a threshold of workers, such as “50 employees or less” instead of a metric such as PPE that clearly defines the ability to comply with these mandates. The “50 employee or less” metric captures many small businesses, and government mandates such as the employer mandate included in the health care law will certainly be detrimental for them; There are also other businesses impacted that are not taken into account, mainly because they’ve created more than 50 jobs.

Under the health care law’s employer mandate, if a business is unable to offer its employees a health care coverage package of “essential benefits” it will have to pay a minimum penalty of $2,000 per employee. Many small businesses have already indicated they will not be able to afford to offer these plans. Others who fall under the 50-employee threshold for exemption have halted plans to grow their businesses and hire more workers simply to remain under this threshold. So, the restaurant and retail chain that earns a $2,500 or less PPE will have to pay a minimum penalty of $2,000 per employee.  

This is simple math: This mandate will wipe out the slim profit earned by these service industry businesses. This will result in major job losses to service industry companies and force some employers to close their doors altogether. The employer mandate must be repealed or our service industry—small, local businesses that are part of their community’s fabric -- will suffer irreparable harm.

Rep. Tiberi, a six-term Member of Congress from Ohio’s 12th Congressional District, is the Chairman of Ways and Means Subcommittee on Select Revenue Measures. Rep. Boustany, a four-term Member of Congress from Louisiana’s 7th Congressional District, is the Chairman of the Ways and Means Subcommittee on Oversight.

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