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A political focus on health care jobs, with no easy answers

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WASHINGTON » As Republicans choreograph a House vote to repeal President Barack Obama’s health care overhaul this week, no charge has stung Democrats more than the argument that the new law will "kill" jobs in an economy wobbling back to life.

In the fight over whether the law will create or destroy jobs, both political parties cite evidence to support their claims. But many economists say the effect on jobs is likely to be modest — neither so negative as Republicans assert nor so positive as Democrats contend.

In any event, economists say, the impact on jobs — a hot political issue now — is not a particularly good standard to use in evaluating a complex law that will affect one-sixth of the economy and almost every American.

For many experts, a more significant test is whether the law will slow the growth of health costs and provide greater value to consumers, taxpayers and employers in return for the $2.5 trillion a year they spend on health care.

"The effect of the law on jobs is likely to be modest," said Katherine Baicker, an economic adviser to President George W. Bush who is now a professor of health economics at Harvard. "The most important effects of the law will be on health costs and coverage and the efficiency of the health care system, not on jobs."

Economists tend to agree that the law could lead some employers to hire fewer low-wage workers, as the nonpartisan Congressional Budget Office has said. But, they add, if the law eventually slows the growth of health costs, it could leave employers with more money to spend on expanding their businesses and even on hiring.

Health care jobs have been growing for years, and many experts say the trend is likely to continue if, as the budget office has projected, more than 30 million people gain coverage.

Republicans say the law will discourage hiring and employment because it will impose additional payroll costs and taxes on many businesses.

The shaky economy and the health care law, passed on party-line votes in both houses of Congress, are separate political issues. But they could become a combustible mix in the 2012 presidential campaign if unemployment remains high and Republicans gain traction with their argument that the health care law is adding to the problem.

White House officials, aware of the political risks, portray the law as an engine of economic growth that could create more than 300,000 jobs by reining in the cost of employee health benefits.

Starting in 2014, employers with 50 or more employees will be required to pay penalties if they do not offer insurance — or if their coverage does not measure up to federal standards — and if at least one worker gets a federal subsidy to help buy insurance. Companies that provide skimpy health benefits or none at all could thus incur substantial costs.

At least one-fourth of workers are in small businesses that will be exempt from the penalties, the Congressional Research Service says, and the desire to keep that exemption could influence the behavior of some business owners.

The law’s defenders say several factors will limit its impact on jobs. Employers will have several years to adjust to many of its incentives and requirements. Most large companies already provide health benefits to employees. And many small employers can obtain tax credits to help defray insurance costs for several years.

Economists say the new costs — including those for new health benefits and penalties — will, over time, generally be passed on to workers, through reductions in wages or other compensation.

"However," the Congressional Budget Office says, "firms generally cannot reduce workers’ wages below the minimum wage," now $7.25 an hour, and this "will probably cause some employers to respond by hiring fewer low-wage workers."

Alternatively, the budget office said, the law may create incentives for some employers to use more part-time workers, because they will not be counted in calculating the amount of penalties.

Rep. Vicky Hartzler of Missouri, a freshman Republican who ousted a 17-term Democrat, said small businesses in her district were "not hiring and not expanding because of the health care law."

But Gary Burtless, a labor economist at the Brookings Institution, said he was "skeptical of the idea that the new law will be a wholesale job-killer."

"If it appears that there will be a lot of extra costs for providing health insurance to your least skilled employees," Burtless said, "my hunch is that employers will find some route, direct or indirect, to avoid paying those costs."

The law’s impact on jobs depends, in part, on whether it will slow the growth of health costs, a question on which expert opinion is divided.

"If the growth of health costs is reduced, employers could use the savings to generate a significant number of jobs," said Frank B. McArdle, manager of the Washington office of Aon Hewitt, a benefits consulting firm. "If costs go up because of health care reform, employers will have to hire or keep a smaller number of employees, or change the mix of full-time and part-time workers."

"The jury is still out" on provisions of the law intended to squeeze health costs, McArdle added.

 

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