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  • Side Effects: Obamacare Hurts Low-Income Workers

    With a struggling economy and stagnant unemployment rate, the last thing the United States needs is any public policy that will hurt job growth. Unfortunately, Obamacare’s new federally mandated, essential benefits package will diminish new job opportunities, especially for low-income workers.

    This is expected to occur because the new law requires employers to offer health care coverage or pay a penalty. And they can’t offer basic health plans. Instead, all job-based health plans must include what the government determines to be “essential benefits.” Since benefits that employers provide to their work force mark a dollar-for-dollar reduction in cash wages, more benefits in these government-mandated plans will mean less available income for salaries or new jobs. Inevitably, this provision will further drive up the health care costs for businesses, forcing them to hold back on new hiring and investments.

    The effect is particularly harmful for low-income workers. In an analysis of the Obamacare provision, John Goodman, President of the National Center for Policy Anlaysis, writes that, “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.)”

    Typically, private sector employers pay their work force based on the value of their labor. Forcing businesses to pay more for labor than its actual worth will likely squeeze many more jobs out of the market.

    Even worse, employers who provide low-income jobs may consider another option: Dropping health coverage altogether and paying the penalty. Businesses with more than 50 employees will face a $2,000 penalty per employee for failing to comply with the government-mandated coverage. This amounts to about $1 an hour for a full-time worker.

    Businesses could drop coverage for low-income workers—who will likely qualify for Medicaid or subsidies in the new federal health insurance exchanges—pay the penalty, and still come out ahead.

    The cost burden of this decision will fall on the American taxpayer, which Goodman warns would ramp up pressure to increase the fine, which would further depress businesses’ income. Companies already are saying the new rule is making them rethink growth in lower income areas. “It’s pretty dire,” Jamie Richardson, spokesman for White Castle, told NPR. The fast-food chain reported in May that the Obamacare provision would require the company to pay $3,000 in penalties per employee (whose share of health care premiums exceeds 9.5 percent in income).

    Heritage analyst Robert Book writes that Obamacare “discourages companies from hiring those who need jobs the most.” This vicious cycle not only hurts businesses and workers, but also the economy at large.

    This post was co-authored by Derek Pyburn.

    Posted in Obamacare [slideshow_deploy]

    5 Responses to Side Effects: Obamacare Hurts Low-Income Workers

    1. DanJ says:

      This is bad news indeed. The latest Bureau of Labor statics show that nationwide workers with less than a high school diploma have an unemployment rate of 15.4% (compared to 4.4% for workers with Bachelors or higher). ObamaCare will guarantee that their jobs will never return and they will be joined by many of the other 10 million in thier educational level too.

      • Legskindal says:

        This paragraph in particular caught my eye. "Businesses could drop coverage for low-income workers—who will likely qualify for Medicaid or subsidies in the new federal health insurance exchanges—pay the penalty, and still come out ahead."

        Aside from the negative externalities created by ObamaCare, this seems as if it could be a big plus for the government in added revenue from firms that opt for paying the fine. Yes, this is a kind of conspiracy theory of sorts, but, assuming that this administration isn't as blind as the public may like to think (I can only hope), ObamaCare may have an ulterior motive for government funding to avoid outrageously high taxes. If the government didn't want anyone to be exempt, they would have placed high penalties on those who avoided it, but they didn't. They seemed to have tried to create a tax-replacing payment that gives certain businesses a very slightly cheaper way out, depending on their circumstances, by paying the money directly to the government. Basically, they'd be trying to dodge the reality of the problem by glossing things over to get money. But, if this were true, I can't imagine how they would be willing to drag the American people down like this.

        Reelection would be a tough shot for the President if he came out to the taxpayers and said "time to raise your taxes by $3,000 a year!" so maybe the idea was to dump some of our debt to the private sector and let it handle itself in the efficient part of our economy. No matter what, the business sector will always produce at its most efficient level, so placing the government's burden here is a great way to bolster this administration's less than stellar reputation (in contrast to where it should be) and keep the debt in better hands by leaving it with businesses.

        You'd think that the government would be doing everything in its power to lower business and production costs after China's recent raise in wages so we could attract more business here. This move by this administration is going to hurt our ability to compete against China in a big way. Hopefully we will change to a strong dollar policy soon so that China can't peg to our currency as easily and maybe our businesses will start to get off the ground again.

    2. Billie says:

      Another government designed crisis forcing government dependency low income earners don't want. It's unlawful force on the business' freedom to run on it's on accord with unlawful force on employees, unConstituional as we know and all taxes should cease immediately…

      The bill needs to be repealed! No compromise, no negotiations. The benefits are few while the punishments, mandates and fees are enormous. Its nothing but a trap. Get rid of this threat and reprimand all behind it.

    3. Pingback: 21 State Lawsuit » Blog Archive » Health reform to hurt low-income workers

    4. Jerry Porter, Freder says:

      Regarding Obamacare's Side Effects, a poorly paraphrased snippet from that famed political pundit, Pogo, seems appropriate:

      "We has met our enemy and he is us!"

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