Job Loss Due to Health Care Reform

Testimony before the Senate Committee on Labor and Human Resources, October 19, 1993

by Jacob Alex Klerman, Dana P. Goldman

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Testimony before the Senate Committee on Labor and Human Resources, October 19, 1993. Employer mandates would provide universal health insurance by extending the current employer-based health insurance financing system. All employees would be required to purchase insurance through their workplace, with employers paying a substantial part of the cost (typically between 50 and 80 percent). These mandates have been opposed on the grounds that they would result in substantial job loss. In fact, experience with other legislation requiring employers to provide benefits to their employees indicates that most of the cost of a mandated benefit is shifted to employees in the form of lower wages. However, for workers without health insurance and with very low earnings, minimum wage legislation prohibits employers from passing on the costs of a mandate by lowering wages. Thus, employers may respond to a mandate by reducing employment of very low-wage workers. Using evidence from recent increases in the minimum wage, the authors estimate that between 100,000 and 275,000 jobs would be lost due to the imposition of an employer mandate. These figures represent less than one-quarter of one percent of all jobs, suggesting job loss is not an important issue in considering the consequences of a mandate.

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