Who Pays For An Employer Mandate?

A blog about business and economics.
July 3 2013 11:13 AM

Who Pays For An Employer Mandate?

The employer responsibility fee issue in the Affordable Care Act raises the more general question of where the real incidence of employer mandates lies. The ACA version of this is structured in a slightly odd way, but the general concept of either mandatory employer-provided benefits or else pay-or-play schemes is fairly widely in use. Most economists' rule of thumb about this would be that in a competitive marketplace, the incidence of such mandates ultimately falls on workers. A firm is going to think of the total cost of hiring someone (including the cost of payroll taxes and mandatory benefits) versus the economic value of an additional employee, and so cash wages will be reduced to cover the extra cost.

But the real world is fairly complicated, so when Carrie H. Colla, William H. Dow, and Arindrajit Dube studied a 2008 San Francisco ordinance that required employers to either provide health benefits or else pay into a public health fund they found almost no labor market impact. Instead, the incidence fell approximately 50 percent on San Francisco consumers and about half on business owners.

Advertisement

Taking a broader view, however, a 1991 study by Jonathan Gruber and Alan Krueger looked at workers' compensation mandates and found that "employers' costs of workers' compensation insurance are largely shifted to employees in the form of lower wages."

I think it's fairly easy to reconcile these two pieces of empirical research as saying that in the short-term the incidence falls on employers but in the longer-term employers succeed in shifting it back onto employees. That thought, plus the fact that Gruber & Krueger are both familiar faces in the Obama administration, is what made me confident back in 2010 that the kinks would all get worked out before any harm was done. Now I'm more worried that we're going to get stuck in a kind of dead zone around this where we don't even make minor fixes to things like the 50 employee cliff or changing it to be 50 full-time equivalent employees rather than 50 full-timers. Part of the upshot of conflict empirical research findings, after all, is that the specifics of program design may matter a great deal.

Matthew Yglesias is the executive editor of Vox and author of The Rent Is Too Damn High.

TODAY IN SLATE

Foreigners

More Than Scottish Pride

Scotland’s referendum isn’t about nationalism. It’s about a system that failed, and a new generation looking to take a chance on itself. 

What Charles Barkley Gets Wrong About Corporal Punishment and Black Culture

Why Greenland’s “Dark Snow” Should Worry You

Three Talented Actresses in Three Terrible New Shows

Why Do Some People See the Virgin Mary in Grilled Cheese?

The science that explains the human need to find meaning in coincidences.

Jurisprudence

Happy Constitution Day!

Too bad it’s almost certainly unconstitutional.

Is It Worth Paying Full Price for the iPhone 6 to Keep Your Unlimited Data Plan? We Crunch the Numbers.

What to Do if You Literally Get a Bug in Your Ear

  News & Politics
Weigel
Sept. 16 2014 7:03 PM Kansas Secretary of State Loses Battle to Protect Senator From Tough Race
  Business
Moneybox
Sept. 16 2014 4:16 PM The iPhone 6 Marks a Fresh Chance for Wireless Carriers to Kill Your Unlimited Data
  Life
The Eye
Sept. 16 2014 12:20 PM These Outdoor Cat Shelters Have More Style Than the Average Home
  Double X
The XX Factor
Sept. 15 2014 3:31 PM My Year As an Abortion Doula
  Slate Plus
Slate Plus Video
Sept. 16 2014 2:06 PM A Farewell From Emily Bazelon The former senior editor talks about her very first Slate pitch and says goodbye to the magazine.
  Arts
Brow Beat
Sept. 16 2014 8:43 PM This 17-Minute Tribute to David Fincher Is the Perfect Preparation for Gone Girl
  Technology
Future Tense
Sept. 16 2014 6:40 PM This iPhone 6 Feature Will Change Weather Forecasting
  Health & Science
Medical Examiner
Sept. 16 2014 11:46 PM The Scariest Campfire Story More horrifying than bears, snakes, or hook-handed killers.
  Sports
Sports Nut
Sept. 15 2014 9:05 PM Giving Up on Goodell How the NFL lost the trust of its most loyal reporters.