Arnold Kling  

Health Care Costs and Wages

Obama's Almost Contradiction... Bob Hall on Quantitative Easin...

John Goodman writes,

In four years' time, the minimum cost of labor will be a $7.25 cash minimum wage and a $5.89 health minimum wage (family), for a total of $13.14 an hour or about $27,331 a year. (I think you can see already that no one is going to want to hire low-wage workers with families.)

Read the whole thing. As you know, I have been making similar points, but I don't blame the new health care law so much. This is already an issue before the new law takes effect.

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COMMENTS (11 to date)
Rebecca Burlingame writes:

Take a deep breath and...laugh at the foolishness of it all. I'm going for a glass of scotch.

Hyena writes:

So his predicted healthcare costs minimum is $1-$3 per hour, not $6 an hour, as businesses can pay the healthcare tax instead. I grow tired of hyperbole, especially when the author later tacitly admits to it.

I also doubt wage stagnation is a likely outcome; again, there's that fine which works out to $1 per hour. Considering that the fine is likely cheaper than many employers' subsidy regimes, wages could actually rise as people are dumped onto exchanges.

Those wages will then be promptly absorbed by insurance payments, but that's always the way with this business. People talk a big game about their expanded paycheck and then proceed to pay for those same services with it.

David C writes:

I usually disagree with John Goodman, but this is probably the strongest argument I've read from him. I wonder though, won't most of these individuals be eligible for the Medicaid expansion? Won't that reduce the companies' costs?

Ironman writes:

David C asks:

I wonder though, won't most of these individuals be eligible for the Medicaid expansion?

Yes. And SNAP (food stamps). And housing assistance. And child care/support assistance. And energy assistance. And career development assistance. And education assistance. And living assistance. And grants. Etc.

Won't that reduce the companies' costs?

It depends. It absolutely won't reduce the taxpayers' costs. Unless they decide to not continue to be so generous.

John H writes:

[Comment removed for supplying false email address. Email the to request restoring this comment. A valid email address is required to post comments on EconLog.--Econlib Ed.]

dave smith writes:

I know this was a problem before the health care bill, but the health care bill makes the problem worse. Many (but not all, of course) people who work at low wage jobs are either 2nd earners or teens in households that have a higher productive head of household with a family plan at work. I am not sure if these folks and their employers get an exemption from the fines, etc., but if they don't, the health care bill will be very destructive to their employment.

Otherwise, many low wage workers are young and have relatively small health care costs. But effectively requiring the employer to pay the premium of an "average" American, you'll get the effect that Goodman fears.

Hyena writes:


It's a common misconception, but you really do have to be very poor to get SNAP. Most people who work minimum wage simply wouldn't qualify.

John Goodman writes:

If you drop coverage for your employees, they will have to enroll in Medicaid if their income is within 133% of poverty and they will have to buy insurance in a health insurance exchange if their income is higher.

In either case, the fine will be $1 an hour for full time employees. But it is hard to believe the future fine will stay that low. Especially if a lot of employers respond by dropping coverage.

Foobarista writes:

He didn't count the "employer share" of the payroll tax, and a gazillion regulations that get hugely expensive, particularly if you have a lot of low-end employees.

So, businesses have two option:

1. Go overseas.
2. Hire illegals.

Plenty of businesses already do both and more will do so with this bad boy...

Matt writes:

During the job application/interviewing process an employer is not allowed, I believe, to ask questions about a potential employee's family composition.

So if a business wants to avoid the risk of paying the full $13/hr for a $7/hr worker, the business is probably going to go without any low-skilled workers at all.

But of course that will get spun as "the rich get richer on the backs of the poor."

Arnold, It appears that Mr. Goodman has retracted his claim.

He states in your comments that in actuality the minimum cost "will be $1 an hour for full time employees" not the $5.89 that you prominently quote. Although anyone can speculate about future changes in laws, that is materially different from making claims about the actual law.

Given your role in disseminating the incorrect information, perhaps it would be appropriate for your to issue a correction.

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