* Re: Minimum Wage (and health insurance)

Topics: Regulation
16 Sep 1994

From: ervan

> [ Employers prefer higher wages to fighting mandatory insurance
> laws. Employees should prefer the flexibility of having the cash. ]

This is particularly true at low wage levels. The real value of employer
provided insurance is increased by the implicit tax deduction (since the
employer gets to deduct it but you don't if you accept it as income to buy
insurance with). But it is reduced by the amount of it that is encumbered by
redistributive effects (e.g. my implicit premium is over priced because I'm
covering my co-worker's kid's stay in the drug 'rehab' hospital-jail).

People making minimum wage have a low or zero effective federal tax rate.
Thus they get no discount but still take the full hit of redistribution.
And, of course, they are obligated to spend that part that really accrues to
them in a less efficient manner than if they could make their own decisions
about using the money (e.g. a poor person might rationally decide to forego
an expensive but dubious test in order to save money for the children's
education, or whatever). This is less so for wealthier persons who would be
more likely to pay out of pocket for the same health care that insurance
provides.

That is, the very people which employer mandates are supposed to help are
the people that are hurt the worst. That aspect of health deform is a
Clinton mediated transfer of money from the working poor to the rich AMA.
---Ervan



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