NCPA - National Center for Policy Analysis


October 27, 2004

If Proposition 72 passes next Tuesday, it will force every California business with 20 or more employees to pay their employees' health insurance bill. Unfortunately, this well meaning piece of legislation will blast a hole through California's ailing economy, says Aaron Yelowitz, an economics professor at the University of Kentucky.

While this "free lunch" may sound attractive to many employees, Yelowitz's study of the U.S. Census data found:

  • Prop. 72 will cost employers more than $12 billion a year and destroy up to 150,000 jobs.
  • The layoffs will be concentrated among the people who need their jobs the most: the poor and unskilled.
  • High school dropouts comprise 17 percent of the California work force, but they will account for up to 40 percent of the jobs lost.
  • Minorities will also take a disproportionate hit: While Hispanics make up 30 percent of the work force, they will bear 53 percent of the job losses.

Furthermore, this referendum, intended to provide Californians with health insurance, will actually cost 32,000 people their existing coverage. Those unfortunate workers should have plenty of time to consider Prop. 72's bitter irony: Employer-provided health insurance is a hollow promise if you no longer have an employer, says Yelowitz.

Source: Aaron Yelowitz, "Free Lunch in Calif. Will Relegate Many to the Bread Lines," Investor's Business Daily, October 27, 2004; and Aaron Yelowitz, "The Economic Impact of Proposition 72 on California Employers," Employment Policies Institute, September 2004.

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