Health Care and Employment

The planned takeover of the health care industry by government will have some significant adverse consequences on employment.  Because the plan requires employers to fund health care for employees or pay a fine, those employers operating in competitive industries will likely have to reduce the size of their workforces — i.e. lay off some employees — in order to pay for the mandated health care costs.  This was the case in Massachusetts when it imposed its plan on employers a few years ago.  With almost 10% unemployment in the U.S., now is a terrible time to try to impose additional costs on hiring and retaining employees.  For a description of some better policies to reduce unemployment, please see my article entitled “The Idiot’s Guide to Creating Jobs and Increasing Employment.”

Furthermore, with mandated health care costs imposed on employers, employers will be very careful about adding employees; rather, employers will choose to give overtime to current employees or outsource more and more functions. In addition, imposing those costs on U.S. employers encourages larger companies to outsource labor to foreign countries where the costs of employment are already significantly less than those in the U.S.  Setting aside whether ObamaCare will result in better health care or broader care for segments of the population currently uninsured, the effect on employment will be negative at a time when government policies should designed to get our citizens back to work.