Senate Democrats Discourage Hiring Poor and Disabled Workers
“Fair Share” an Unfair Deal for Low-Income Households, Workers with Disabilities
As they attempt to craft a “bipartisan compromise,” Democrats on the Senate Finance Committee have discovered a potential “solution” to a mandate on employers to buy health coverage that may be worse than the problem it attempts to remedy:
- Press reports indicate that Finance Committee negotiators may require employers that do not offer coverage to pay for half of the cost of any Medicaid beneficiaries employed by the firm, as well as the full cost of any “low-income” subsidies for individuals with income up to three times the federal poverty level ($66,150 for a family of four).
- Groups from the Heritage Foundation to the liberal Center for Budget and Policy Priorities have criticized the Finance Committee proposal, which could in practice lead to hiring discrimination against low-wage workers. For instance, a single mother would prove much less attractive to an employer from a financial perspective than a college-age student from a wealthy family—the former would cost the firm additional money in “fair share” contributions, while the latter would not.
- In many cases, the cost of the “fair share” penalty may actually exceed the “pay-or-play” tax on businesses proposed in the House legislation. For instance, under the House bill (H.R. 3200) an employer who cannot afford to offer health coverage would pay $1,664 in tax penalties per year for a full-time worker making $10 per hour. If that employer were subjected to a “fair share” contribution equaling even half of the cost of insurance subsidies in the Exchange, the tax on that business would be significantly higher—as average subsidy amounts would total nearly $5,000 per year under most legislative proposals being considered. A “fair share” penalty of $2,500 would serve as a further disincentive to hire low-wage workers, as employers would be hit with high tax penalties on only a certain segment of the targeted workforce—individuals from poorer backgrounds.
- As the liberal Center for Budget and Policy Priorities noted, “the [“fair share”] proposal also could discourage the hiring of low-income people with disabilities who have no choice but to enroll in Medicaid” in order to obtain proper treatment for their disabilities.
- Regardless of the specifics, studies have confirmed the impact of new jobs taxes—i.e., employer mandates—on low-wage workers. For instance, the Congressional Budget Office recently noted that, “a pay-or-play provision could reduce the hiring of low-wage workers, whose wages could not fall by the full cost of…a substantial pay-or-play fee if they were close to the minimum wage.” Harvard Professor Kate Baicker has also published an analysis demonstrating that at least 5.5 million low-wage workers would be “at substantial risk of unemployment” due to new mandates on employers—and that minority workers were twice as likely to lose their jobs as their white counterparts.
Some Members may be concerned by the panoply of proposals to raise taxes on businesses that cannot afford to provide coverage to their workers. At a time when unemployment stands at 26-year highs—and with job losses still rising—Democrat proposals to impose new job-related taxes on businesses comprise one sure way to delay economic recovery still further.