NCPA - National Center for Policy Analysis

Health Reform Will Price Less Skilled Workers Out of Full-Time Jobs

October 19, 2011

President Obama's health care overhaul has faced no lack of criticism since its formulation and passage.  The argument that the new law will hurt unskilled, low-income workers (a population that was supposed to reap benefits from the plan) is particularly compelling.  The argument is rooted in the fact that the new system will raise the cost of hiring additional workers, leaving employers with few options that will not hurt these workers in the long run, says James Sherk, a senior policy analyst in labor economics at the Heritage Foundation.

  • The employer health care premiums distributed across a full-time work year will add $1.79 per hour to labor costs for a single health insurance plan and $5.51 per hour for a family plan.
  • These additional costs will raise average hourly labor costs of full-time workers to $10.03 with a single health plan and $13.75 with family coverage.
  • Meanwhile, the $2,000 penalty for dumping workers onto the government health care exchanges averages out to only $1 per hour increase in labor costs.

While much will undoubtedly change for businesses with the implementation of the new health care law, it remains unlikely that the amount of their compensation packages will increase.  Therefore, in order to minimize the additional costs associated with compliance with the new law, employers will likely choose one of two methods.

  • First, they will stop offering a sponsored health care option to their employees, electing instead to put them in the government health care exchanges.
  • The other option is to reduce many workers to part-time hours so that they cannot qualify for benefits.

By raising employer labor costs by $1.79 and $5.51 for each plan, the new law has raised the minimum threshold to qualify for a full-time position -- workers will have to be at least that much more productive in order to work full-time.

Source: James Sherk, "Obamacare Will Price Less Skilled Workers Out of Full-Time Jobs," Heritage Foundation, October 11, 2011.

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