Amazon is not a bad employer, but Stop-BEZOS is a bad bill

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Bernie Sanders (I-VT) and Ro Khanna (D-CA) just introduced the 'Act to stop bad employers by zeroing subsidies"(Or Stop-BEZOS) that would punish big companies like Amazon, Walmart and McDonalds for paying too little for their employees. Amazon does not need to pay more for its employees, but would force large companies to pay an excise tax to reimburse the government for the cost of federal benefits to their workers. But the same market forces that drive down the wages of low-skilled workers would eventually undermine the Sanders / Khanna bill, which is hurting many of the workers they want to help.

The name of the bill refers to the problem. Amazon and the other giants are not good or bad. Market forces determine wages for both large and small firms. As far as I know, Amazon's CEO, Jeff Bezos, might like to raise wages, but unless his competitors do the same, Amazon would lose money. And if that happened, the shareholders would probably revolt.

The bill aims to defeat market forces, but it would create a series of bad incentives. First, the employers involved would have a strong incentive to avoid hiring workers who could claim SNAP, Medicaid or other benefits. The bill prohibits employers from directly asking questions about the receipt of benefits, but companies could identify likely recipients without asking. Single parents with low incomes are the most likely to be eligible for SNAP and Medicaid and most of them are women. Employers would be less likely to hire single women of childbearing age. Amazon could drop her parental leave because he does not want to attract or retain new parents.

Businesses will be less inclined to open facilities in states that have expanded coverage of Medicaid under the Affordable Care Act, as more workers could potentially subject their employers to Stop-BEZOS penalties.

Part-time workers are also more likely to be eligible for federal benefits than full-time workers, which means that part-time, low-wage jobs in large firms may become scarce. Firms will be more likely to pay for overtime than to increase their labor force to cope with the seasonal increase in demand, as part-time workers are more likely to be eligible for resources. For the same reason, businesses will be less likely to hire workers who have left the workforce for a large part of the year or take a chance on workers with low employment histories that they may have to give up.

The bill also creates a giant cliff for employers when they reach 500 employers (based on the average payroll for the year) because only these companies are subject to penalties. A business with many low-wage single parents would face a huge (and somewhat unpredictable) penalty^e worker so that they have a strong incentive to stop at 499.

And the bill could speed up the pace of automation because robots do not get federal benefits.

Ultimately, this legislation will hurt the most vulnerable households. If they can not find work at the big "bad employers", they might be able to get a job in a small business without being penalized, but the average small business pays significantly less pay ( wages and benefits included) to the average A big one. Small businesses are also much more likely to fail than larger ones. Presumably, the promoters of bills do not intend to move workers to less well paid and less secure jobs.

By the way, the bill seems to impose the excise tax on the penalty to all major employers, not just corporations (even though the legislation explicitly targets "corporate welfare"). Would the excise apply to limited liability companies, subchapter S companies, non-profit organizations, and governments? The GAO found that approximately 23,000 military members benefited from SNAP benefits in 2013; About one in four children in Defense Department schools receive free or discounted lunches. Will the federal government tax itself as a bad employer? Likewise, school bus drivers, school guards and even teachers have earnings sufficiently low to qualify for SNAP or other means tested benefits. The cash – strapped schools may have even less capacity than Amazon to raise their wages to avoid excise tax.

There are less counterproductive ways to boost workers' wages, which Sanders and Khanna also support. A higher minimum wage is a much more direct way to get employers to pay higher wages, even if that does not solve the problem of the robot. Nevertheless, with an unemployment rate close to the record lows, it is probably the best time to bring the minimum wage back to historical levels (and then adjust it automatically to keep up with the pace of inflation) . Another approach would be to enact laws that promote unionization among large employers. An even better approach – one that would actually increase employment – is to increase the earned income tax credit, for which Khanna has worked hard.

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Bernie Sanders (I-VT) and Ro Khanna (D-CA) just introduced the 'Act to stop bad employers by zeroing subsidies"(Or Stop-BEZOS) that would punish big companies like Amazon, Walmart and McDonalds for paying too little for their employees. Amazon does not need to pay more for its employees, but would force large companies to pay an excise tax to reimburse the government for the cost of federal benefits to their workers. But the same market forces that drive down the wages of low-skilled workers would eventually undermine the Sanders / Khanna bill, which is hurting many of the workers they want to help.

The name of the bill refers to the problem. Amazon and the other giants are not good or bad. Market forces determine wages for both large and small firms. As far as I know, Amazon's CEO, Jeff Bezos, might like to raise wages, but unless his competitors do the same, Amazon would lose money. And if that happened, the shareholders would probably revolt.

The bill aims to defeat market forces, but it would create a series of bad incentives. First, the employers involved would have a strong incentive to avoid hiring workers who could claim SNAP, Medicaid or other benefits. The bill prohibits employers from directly asking questions about the receipt of benefits, but companies could identify likely recipients without asking. Single parents with low incomes are the most likely to be eligible for SNAP and Medicaid and most of them are women. Employers would be less likely to hire single women of childbearing age. Amazon could drop her parental leave because he does not want to attract or retain new parents.

Businesses will be less inclined to open facilities in states that have expanded coverage of Medicaid under the Affordable Care Act, as more workers could potentially subject their employers to Stop-BEZOS penalties.

Part-time workers are also more likely to be eligible for federal benefits than full-time workers, which means that part-time, low-wage jobs in large firms may become scarce. Firms will be more likely to pay for overtime than to increase their labor force to cope with the seasonal increase in demand, as part-time workers are more likely to be eligible for resources. For the same reason, businesses will be less likely to hire workers who have left the workforce for a large part of the year or take a chance on workers with low employment histories that they may have to give up.

The bill also creates a giant cliff for employers when they reach 500 employers (based on the average payroll for the year) because only these companies are subject to penalties. A business with many low-wage single parents would face a huge (and somewhat unpredictable) penalty^e worker so that they have a strong incentive to stop at 499.

And the bill could speed up the pace of automation because robots do not get federal benefits.

Ultimately, this legislation will hurt the most vulnerable households. If they can not find work at the big "bad employers", they might be able to get a job in a small business without being penalized, but the average small business pays significantly less pay ( wages and benefits included) to the average A big one. Small businesses are also much more likely to fail than larger ones. Presumably, the promoters of bills do not intend to move workers to less well paid and less secure jobs.

By the way, the bill seems to impose the excise tax on the penalty to all major employers, not just corporations (even though the legislation explicitly targets "corporate welfare"). Would the excise apply to limited liability companies, subchapter S companies, non-profit organizations, and governments? The GAO found that approximately 23,000 military members benefited from SNAP benefits in 2013; About one in four children in Defense Department schools receive free or discounted lunches. Will the federal government tax itself as a bad employer? Likewise, school bus drivers, school guards and even teachers have earnings sufficiently low to qualify for SNAP or other means tested benefits. The cash – strapped schools may have even less capacity than Amazon to raise their wages to avoid excise tax.

There are less counterproductive ways to boost workers' wages, which Sanders and Khanna also support. A higher minimum wage is a much more direct way to get employers to pay higher wages, even if that does not solve the problem of the robot. Nevertheless, with an unemployment rate close to the record lows, it is probably the best time to bring the minimum wage back to historical levels (and then adjust it automatically to keep up with the pace of inflation) . Another approach would be to enact laws that promote unionization among large employers. An even better approach – one that would actually increase employment – is to increase the earned income tax credit, for which Khanna has worked hard.