Several of the analyses of the Obama plan repeat the old canard that an obligation for employers to pay for health benefits for their employees, either by providing health coverage or by paying into a purchasing pool, are job killers. Joseph Antos, Gail Wilensky and Hanns Kuttner in a recent Health Affairs piece say, “Wages and employment would fall….The pay or play mandate, which is meant to help workers who do not have insurance gain coverage, could instead undermine their chances for economic success.” In a recent piece in the New England Journal of Medicine, Antos opines that the added cost of a pay-or-play mandate “would be covered by lowering wages or benefits or reducing employment.”
This is precisely the same argument that is made against the minimum wage in its various incarnations, including minimum wage increases and living wage ordinances. It is not true for the minimum wage. And it is not true for an employer obligation to pay for health benefits.
Moderate minimum wage increases are now widely recognized to have little or no effect on employment. Economists David Card and Alan Krueger who did the original studies on the impact of the minimum wage (and the further studies when many other economists tried to rip their research apart) found that the minimum wage increases had little or no impact on employment. Why? Low income workers spend what they make. And one of the places they spend that money is at fast food restaurants.
This should not be a surprise. It is why we have unemployment insurance: so when people are unemployed, they have some income so they can keep paying the rent and buying groceries. Unemployment insurance is one of the social insurance mechanisms that prevent recessions from turning into Great Depressions. That is why unemployment insurance was part of the original Social Security Act in 1935.
What about health care? The UC Berkeley Labor Center has done a series of pieces on the impact of employer mandates in various health reform proposals in California. A piece they did in July 2007 found modest positive economic impacts from both the health reform proposal by Governor Schwarzenegger and the competing measure, AB8 by then-Assembly Speaker Nunez and then-Senate President Pro Tem Perata. As economist Michael Reich observes in his foreword,
The authors find that the leading health reform proposals for California have been crafted in a manner that is not likely to generate adverse employment impacts. According to their findings, most firms will experience little or no net change in business operating costs after a short adjustment period. Consistent with the best research on the minimum wage, payroll and cost increases of these magnitudes are unlikely to reduce employment in California, while improving the health status of many Californians. Moreover, both health reform packages analyzed would boost productivity as workers take fewer sick days due to poor health and as workers are more able to work where they are most valuable, with their job mobility less hindered by health insurance concerns.
Just as with the minimum wage, thoughtfully designed employer obligations to pay for health benefits do not cost jobs—and in fact may have positive economic impacts.
We would postulate that the economic benefits go beyond those cited by Michael Reich. In the same way that unemployment insurance, Social Security and Medicare help to underpin economic security for millions of low and moderate income Americans and to contribute to the prosperity of the business community which depends so heavily on consumer spending, an obligation on employers to pay for health benefits may also help to contribute to economic prosperity. This is especially true when we look at low and moderate income working families, precisely those families whose wages have stagnated over the last decade.
Again, it is low and moderate income Californians (and Americans) who are mostly likely to face high health care costs, because they are more likely to be uninsured or underinsured—and providing affordable health benefits will increase their disposable income, helping to revitalize the economy. This is not fanciful: we report here on study after study showing that low and moderate income people suffer most from medical bills and medical debt problems. A recent study by the Commonwealth Fund found that more than half of all low and moderate income Americans (defined as incomes under $40,000 annually) had problems with medical bills or medical debt.
And it is low and moderate income workers that lack power in the labor market, as demonstrated both by the lower compensation they command and wage stagnation over the last decade. (Lower wages usually accompany less generous benefits: this is not perfectly so but generally true.) Providing these lower income workers affordable health benefits and minimizing problems with medical bills and medical debt so that they have adequate access to care, means they would have more money to spend on other things. And live healthier and longer.
Is there a benefit to our economy from providing affordable health benefits to low and moderate income working families? Do reform proposals, like that by Obama or those we supported in California, have an economic impact similar to unemployment insurance, Social Security and Medicare, the social insurance programs which help to underpin our economy? Particularly when we look at lower income working families, we ask whether adequate, affordable health benefits would help them to have a foundation of income security, the kind of income security that helped to power the American economy for so many decades and that today is lacking for so many.