How to create 5 million jobs overnight

The previous post on modular bureaucracy can be summed thus:  to instantly reduce unemployment, radically simplify small business employment rules to make hiring effortless. Here is a specific suggestion.

For businesses with less than $500k gross receipts and fewer than 3 employees, all of whom are paid less than $80k/yr:

  • No federal withholding (employee is responsible for his own taxes).
  • Payroll tax, social security and medicare are a flat $300 per month per employee, payable by monthly automatic ACH (supported by all US banks), no paper checks.
  • Federal govt provides first $100k of liability and worker’s comp insurance.

This is a classic 80/20 optimization, or more like 95/5.  Small business hiring would explode. I suspect it would bring some of the shadow economy (cash employment off the books) back into the legitimate system.

People do not appreciate the scale of the benefit this change would bring.  A huge percentage of total employment in the US is from the smallest businesses.  This move could prompt millions of sole proprietorships to hire their first employee.

Yes, it would turn worker’s comp into even more of a fraud machine — but that is a problem with worker’s comp law, not with insurance or employment law.  A properly modular bureaucracy would solve that problem separately.

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