An Economist decodes the “Affordable Care Act”-Imprimis

Don’t think this law was not designed to further undermine the American Economy!-S.T Lloyd

I get the Imprimis publication from Hillsdale College. The articles are sometimes a little more in-depth than I want to read, but this month Casey Muligan wrote from an economics standpoint, about the implications of the “Obamacare” legislation. He says that from a labor-market perspective, the costs far outweigh the benefits, and that it penalizes those in low-skill, lower-paying jobs the most. The following is a brief summary of Muligan’s article.

Using an economic concept known as “tax distortion”, he explains how businesses (or individuals) change the way they function in order to either decrease their taxes or increase their subsidy, going on to explain that the reason these are called distortions, is because the changes don’t occur really for business reasons, or for personal reasons, but only occur solely because of tax codes. Instead of adjusting the cost of services according to income level, this law adjusts costs according to your work situation.

When something is subsidized, more people or businesses use it. When something is taxed, as a rule, you get less off it. In this instance, full-time employment is what is being taxed! Part-time employment is, conversely, being subsidized. What’s that going to mean for all those folks hoping to eventually once again secure full-time employment?

Ethanol is subsidized, therefore there is great incentive to manufacture it. However, a move like that isn’t isolated. If a large portion of corn is being used for fuel, then the volume of corn for food, becomes a little more scarce, driving up the price. By subsidizing the health care for part time employees, this amounts to a tax upon the full-time employees.

You can see what that does to the incentive of a business person to keep full-time employees on the payroll. It doesn’t foster hiring full-timers. If the company cuts everyone back to part time, it no longer has to pay the penalty. Not only that, but the amount of the penalty will rise along with health care costs, even as the economy shrinks! So the pain has only just begun!

Mulligan does a good job of putting the effects into layman terms anyone can understand. He asks, essentially; “how many hours does an employee have to work to justify the employer keeping that employee in the position?”. The penalty now is 2K, and not deductible as a business expense. In salary terms, that means it is actually more like $3000 per non-insured employee. There goes any incentive to hire full-time workers. Not only that, but also any incentive to grow the company to more than fifty employees, since a company with less than fifty is exempt. The answer to the question posed regarding how many hours an employee has to work to justify having their job in light of the penalty costs to the employer, well, for a minimum wage earner eight hours out of every work week, year round, is essentially working “for the government” to pay off this penalty. If it is a higher-paid employee, they obviously will produce that $3000 worth of value for the company in less time.

Full time employees don’t get the subsidy. So essentially anyone who is a full-time employee, is being penalized for it, whether it is officially called a “tax” or not. Middle-income individuals may have to work up to thirty hours of their week, just to produce the “value” to their employee to justify letting them keep their FT status, that a part-timer would get for free!

Employee productivity will suffer, quality and service will, in turn, diminish, and people will desert the business, jobs will be lost, and businesses will fold. Both employment, and GDP will drop. The cost overall is about $6000 per every single person who gets health insurance under this law, and that’s not even getting into the cost of actually paying the healthcare providers. Mulligan closes with this line: