As bitter as the controversy concerning the health care bill was, that was when we only discussed the generalities of the bill. As the details come forth it looks even worse.
Employers with fewer than 25 employees can get a 33% tax credit for providing health coverage to their employees. Non profits can get a 25% credit toward their payroll tax.
Without getting a PhD in economics from Harvard, you can figure out that this is a strong incentive for an employer with 28 employees to shed a few workers, and a decent disincentive for an employer with 22 workers to grow and hire anyone.
It is precisely these companies that usually provide the majority of the new jobs coming out of a recession, and this health care bill targets these companies with an incentive not to hire. Of course that is not the intention. The intention is to give small businesses an incentive to give their employees health care, but this is a prime example of how the law of unintended consequences works. It is also an example of what happens when the economically ignorant hold the reigns of political power.
But there is more.
An employer of a lot of low wage and low income employees such as the fast food industry is now faced with either providing employees with thousands of dollars of health care coverage or paying thousands of dollars in penalties. But the law only applies to full time workers which means those making over thirty hours a week.
You can probably guess that we will see a lot more part time workers in the fast food business. The ones who pay for this lack of foresight are the lowest paid employees that will now have to work multiple part time jobs to earn the same money they did before. In fact we will probably see part time workers being able to command a premium to help employers avoid the new mandated burdensome costs.
The political idiots designing this mess probably just expected the employers to pass on the new higher costs by charging another quarter for a bag of fries or another fifty cents for eggs and grits. If the restaurants thought they could charge another two bits for their product they would have already. Even if all of their competition are now in the same boat there is other competition that is not. The higher price may tip the customers to scramble their own eggs at home. I’ve done it, and it is really pretty easy.
Employers do not have to provide any health care coverage for the first 90 days. Expect the ski season to shorten or winter season workers to move between slopes for employment every 90 days. The marginal cost of that employee on day 91 becomes both huge and easily avoidable.
Besides the clumsy attempt to regulate a market they poorly understand this bill was hastily and sloppily conceived. In their effort to get something through and avoid further votes that would jeopardize the fragile chance of passing, they avoided the normal process of hashing out conflicts in committees and replaced legislative prudence with the words, “The Secretary shall deem……” This leaves 2700 pages of uncertainty left to be decided by the whim of an appointed official.
If you are a contractor bidding a job to start in 2 years what do you project for a labor rate when an interpretation from an official can change your cost structure enough to erase any profit you pay have projected? You may even be forced to cut wage rates to compensate for possible increases in health insurance costs. More likely few companies will take the risk of seeking opportunities when there is no way to have any certainty of your costs.
This bill is a job killer. The lowest wage workers will suffer the most.