Monday, October 24, 2011

The Wage Implications of Obamacare

I am always nervous about citations to studies prepared by outfits with political agendas (although what organization doesn't have an agenda these days?).  But the numbers cited in this assessment by the Heritage Foundation are consistent with numbers that I saw from the CBO and other relatively unbiased sources when the debate over the PPACA was raging a year and a half ago.

The short answer is that for a minimum-wage worker, Obamacare will impose an almost 80% wage surcharge per family in the form of mandatory health insurance payments that will be absorbed primarily by the employer.

In hard numbers, average employees that cannot contribute at least $20,000 (single plan) or $27,500 (family plan) of value to their employer will not receive full-time employment positions. For states like Illinois, which has a higher minimum wage than the federal requirement, the overhead cost assigned to an employee with family plan medical insurance rises to almost $30,000 a year (based on a 2000 hour work year).

These values will be very hard for many unskilled laborers to meet. Employers will have no economic alternative but to hire unskilled workers to part-time positions, or hold their workforces below the 50 person threshold, in order to meet the new Obamacare requirements.  This is in addition to dumping the low value producers into the government run health insurance exchanges, which appears to be the main goal of the statute in the long run.

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