Is the health care law a “job killer,” as Republicans insist? In a sense – but not in the way you think.
First, let’s get one potential misunderstanding out of the way. We’re talking about the effects of the law once the economy is again running at full capacity – not the impact on employment while the economy is still scratching its way out of recession. Which is only fair, since the path between here and full recovery will be almost entirely determined by fiscal and monetary policy, not by regulation of one industry or another.
Now back to the “job-killer” charge. The law will eventually impose a tax on businesses that don’t offer health insurance to low- and middle-income employees. However, the impact on the demand for labor will be small because it (a) will only apply to employers with 50+ employees, and (b) will almost certainly be passed on to most employees in the form of lower wages. That leaves just one vulnerable group: employees of large firms who earn the minimum wage (or not much more). Employers won’t be able to stick it to this relatively small group because they can’t reduce wages below the legal hourly minimum – between $7.25 (federal) and $8.50 (Oregon). So some people who want jobs will presumably be priced out of the market.
The larger – but very different – impact follows from the reality that the law will make it possible for everybody to obtain insurance at relatively low cost, even if they don’t have jobs. For starters, the law will sharply raise the maximum family income at which people are no longer eligible for Medicaid. And the law will subsidize insurance bought by individuals with moderate incomes. This should reduce the incentives of otherwise-reluctant workers – say, second-earners in families with young children and older workers below retirement age with minor disabilities – to enter (or stay in) the job market.
Will this supply-side impact on work be a bad thing? Perhaps it would in a world in which labor is badly needed to meet national goals – say, in a rerun of World War II. Otherwise, it makes no more sense to push people into the labor force by making access to health insurance contingent on working than it would be to insist that people work if they want driver’s licenses or the right to send their kids to public colleges.
Note the political irony here. The law will only lead to involuntary unemployment because it was tailored to maintain the current system under which most people are insured through their employers – an approach that surely matches Republicans’ preference for minimizing the role of government. The alternative routes, replacing employer-based insurance with government insurance in the style of Medicare or creating a highly regulated private insurance market for individuals, would have slightly expanded job opportunities for low-wage workers by taking employers out of the insurance loop.
If Republicans’ highest priority at the moment was creating a better health insurance system, they’d be focusing on fixing what’s really wrong with Obamacare – its failure to put sharp teeth into the law’s mechanisms for containing costs. Tamping down health care inflation will only be possible, of course, when politicians make a stand against interests ranging from medical specialists earning seven-figure incomes to people who expect exotic treatment at government expense. If they won’t do that, though, why do they deserve to be elected?
(This post was also published on Forbes.com.)