At the New Republic’s The Treatment, I recently wrote about the need for the employer responsibility provisions in order to secure on-the-job coverage, and about where business is regarding health reform.
Those who oppose an employer requirement, and health reform in general, have been making wild claims about the supposed negative impact. To fact-check these claims, here’s a guest commentary by Ken Jacobs, Chair of the UC-Berkeley Center for Labor Research and Education:
Over the last few months, we have heard any number of outrageous claims about the potential impacts of the proposed health care bills (death panels, end to private insurance, etc.). Still, the claim made by Republican speaker after speaker during Saturdays House debate that the bill would result in a loss of 5.5 million jobs stands out. They even go so far as to say (see House Republican Leader John Boehner’s website), that the research was based on a methodology developed by Dr. Christina Romer, Chair of the Council of Economic Advisors, and Jared Bernstein, the Vice President’s Chief Economist. What’s going on here?
The Economic Policies Institute’s Josh Bevans pointed me to Politifact, which does a good job of debunking the claim. It turns out that the number comes from Republican staff of the House Weighs and Means Committee.
They started with an estimated tax increase on employers from the play or pay provision of $300 billion. It is not clear where this number comes from; the CBO estimate is $163 billion over ten years. They treat that number as though it is a direct reduction in GDP for a single year, thereby increasing the projected impact tenfold. To get the total impact on GDP they use a multiplier from a 2007 paper by Christina Romer which explicitly states that the analysis in the paper pertains to tax increases or cuts that change the total spending in the economy. This would be the case, for example, for a tax increase to fund the deficit where there is no corresponding increase in government spending, or for a tax cut to stimulate the economy that was not balanced by a reduction in spending. The paper is very clear that the analysis would not apply to a social insurance program where the increased tax is balanced by an equal increase in output—as with the healthcare act. Finally, the minority committee staff applied a ratio of changes in GDP to job losses or gains from the stimulus analysis by Romer and Bernstein to reach a number of lost jobs.
So to reiterate—they:
* use a methodology that is clearly inappropriate for the case at hand
* start with a cost to employers that is nearly double that of the CBO projections
* inexplicably multiply the results by ten.
Then they claim that the analysis was done with a methodology from the Counsel of Economic Advisors—one Congressman actually directly attributed the estimates to the CEA—even as it directly contradicts what Romer wrote in the paper they cite. Amazing.
So, what does the academic literature tell us about pay or play provisions and job losses? Studies on Hawaii and San Francisco, which both have employer requirements, have found no measurable impacts on employment. Most economists believe that for workers above the minimum wage the costs of health insurance are passed on to workers over time in the form of lower compensation. The impact of a health requirement of the size under consideration would be equivalent to a modest increase in the minimum wage. Drawing on the minimum wage and health mandate literature, Philip Cryan found that the job impacts of an employer requirement of 8 percent of payroll, with no exemptions or subsidies for small businesses, would be in the range of 166,000 jobs lost to 55,000 jobs gained.
This is before taking into account the many positive impacts of health reform on jobs, small businesses and the economy as a whole. The biggest “job-killer” would be a failure to act.