Some Simple Economics of Mandated Benefits
3rd July 2009
Tyler Cowen boils it down.
The case against is simple too. Say that previously unprovided health insurance would have cost the employer 60 and would have been valued by the worker at 40. You’re imposing a tax of 20 on the employment relation. In the short run firms will hire less labor and during a recession is an especially bad time to produce that effect.
In the longer run, if the market is competitive, wages will fall by 20. We’re forcing relatively poor workers to consume more medical insurance, and more medical care, than they wish to, at the expense of their cash income.