The CEOs Driving Our Recovery Fear Obamacare
Business + Economy

The CEOs Driving Our Recovery Fear Obamacare


When the public flips through snapshots on the economy, a lot of attention goes to the big names—such as Apple, General Motors, General Electric, Wal-Mart, and ExxonMobil.

Their fortunes are easy to track in earnings reports, daily stock market swings, and speeches by executives. It’s much harder to track smaller, privately held firms, or even the publicly traded firms that seldom appear in the headlines.

But the National Center for the Middle Market—run out of Ohio State University’s Fisher College of Business—offers a glimpse into how these businesses think. On Wednesday, the center released its first quarter 2013 survey of companies with revenues between $10 million and $1 billion.

The survey indicates that Obamacare and health insurance costs are the primary challenge for this group of 197,000 companies that account for 43 million jobs.

By the center’s calculations, these companies added 2.2 million jobs during the depths of the financial crisis from 2007 to 2010. Unlike larger companies, they chose not to cut costs by slashing payrolls. And new firms are seen as a driver of growth, mid-markets are relatively old companies.

“These are not startups,” said Anil Makhija, the center’s academic director and an OSU finance professor. “In fact, the average age of the firm in the middle market is a whopping 31 years.”

Here are three critical takeaways from the survey:

• Healthcare Is The Big Uncertainty – The gridlock between President Obama and congressional Republicans has disrupted the economy. It could get worse as the debt ceiling gets breached in May. But only 45 percent described the political environment as “highly challenging.” The major fear came from uncertainty about the cost of healthcare with 57 percent saying its highly challenging.

For all the talk about the negative impact of budget sequestration and expiration of the payroll tax holiday, the survey suggests that transitioning into Obamacare next year will be rocky. Only 93 percent of companies say they would prefer to continue providing some form of insurance, while just 7 percent are weighing whether to pay the penalty fee that Obamacare would impose for not offering coverage.

• Fewer Plan to Hold Cash– One of the big economic drags in recent years has been companies that are sitting on billions of dollars in cash. Businesses figured it would be safer to build up their reserves, instead of investing in new employees or facilities. In the first quarter of 2012, 30 percent of investments were allocated to holding cash. That figure fell to 24 percent for the first quarter of 2013, the lowest level in five quarters of the survey. The amount being allocated to investing in personnel nearly doubled to 13 percent from 7 percent.

• Mid-Market Companies Expect to Add 900,000 Jobs – Employment at these companies grew by 2.2 percent in the previous 12 months. Projections suggest from the survey suggest hiring will move at a 2.1 percent clip in the next 12 months. That translates into 900,000 new jobs—or 75,000 a month. Job growth is critical to an economic rebound, yet the survey notes that the returns from each new employee are starting to drop.

“However, productivity, measured by the relationship of revenue to employees, may be reaching its limits since the gap between revenue and employment growth continues to narrow,” the quarterly report notes.