More on the lack of employer responsibility and the “free rider” provision of the Senate Finance Committee proposal…
As employers restructure work for low- and moderate-income employees to avoid paying the free rider penalty, the taxpayer ends up footing the bill for health benefits for employees of some very large employers that rely on low and moderate income workforces.
CBO in its analysis assumes that every dollar not spent on health benefits by an employer will translate into wages. Is this really true for low and moderate wage employees? By definition, these employees lack bargaining power in the labor market: their wages are below the median wage. Will it be possible for employers to avoid paying the credit and fail to increase wages? For employers with workforces that are predominantly below the median wage, the answer could be a resounding yes.
Widespread restructuring of employment by employers with predominantly low and moderate income employees could blow up CBO’s conclusion that Social Security and income taxes will increase because wages will increase if health benefits are not paid by employers. CBO may be right about this in the aggregate and certainly for higher wage employees and even higher wage workforces but is this correct for low/moderate wage workforces? Or will employers with predominantly low/moderate wage workforces simply restructure work so that the employer avoids the free rider provision? Is the free rider provision a free pass for employers?
Contrast this with HR3200 which requires employers to provide benefits or pay 8% of payroll per hour worker for each employee. Here there is no incentive to restructure work to be less than a certain number of hours per week. If the nature of the work requires part-time employment (a school bus driver, a restaurant that is only open at lunch) or part-year employment (residential construction, the Christmas season in retail), the employer is only on the hook for the hours worked. But there is no incentive to restructure the work so that low and moderate wage workers work less than 30 hours per week.
Even the Senate HELP bill is better than Senate Finance: at least it requires a modest payment for part-time workers as well as a proportional payment for part-year employees.
The evidence from Hawaii is somewhat mixed—but there the threshold was 20 hours per week. While it is relatively easy to restructure employment from 40 hours per week to 30 hours per week for an employer with 50 or more employees, it is tougher to restructure work to be less than 20 hours per week. Shifts of seven hours or six hours four days per week are easy to arrange: getting under 20 hours per week is tougher.