Friday, July 28, 2006
Minimum wage hike would increase uninsured
[John C. Goodman and Richard B. McKenzie, "Saving Health Insurance from the Minimum Wage," NCPA Brief Analysis No. 565, 28 July 2006.]
John Goodman and Richard McKenzie make an interesting point about health insurance in a new policy brief - not surprisingly, it turns out that politicians are overlooking a serious unintended consequence of the move to raise the minimum wage:
An unintended consequence of a minimum wage increase would likely be a rise in the number of Americans without health insurance. Congress can avoid adding to the ranks of the uninsured — in fact, it can make progress toward reducing their number — by giving employers and employees the option of using the amount of the minimum wage increase for health insurance in lieu of wages.
If there is an increase in the minimum wage, employers should be able to count their spending on health insurance for their employees — dollar for dollar — against the minimum wage increase. Specifically, all employers should be allowed to count up to $2.10 per hour per worker in health benefits toward meeting the minimum wage level. As a result, employers would not have to reduce health insurance benefits to meet the wage mandate.
Employees should also have the option of applying the minimum wage increase to their own expenses for health insurance. Employers who do not provide health insurance could set up a flexible spending account for employees at minimum cost. Employees could then use (potentially) taxable wage income to purchase nontaxed health insurance instead.
Market forces will largely neutralize the impact of a minimum wage increase, and the minimum-wage employee is unlikely to be much better off than before the increase. However, if the health insurance option is part of the legislation, it offers an opportunity to reduce rather than increase the number of Americans without health insurance.
[Matthew Hisrich, "The Uninsured in Kansas - A Closer Look," The Flint Hills Center, 28 July 2005.]
John Goodman and Richard McKenzie make an interesting point about health insurance in a new policy brief - not surprisingly, it turns out that politicians are overlooking a serious unintended consequence of the move to raise the minimum wage:
An unintended consequence of a minimum wage increase would likely be a rise in the number of Americans without health insurance. Congress can avoid adding to the ranks of the uninsured — in fact, it can make progress toward reducing their number — by giving employers and employees the option of using the amount of the minimum wage increase for health insurance in lieu of wages.
If there is an increase in the minimum wage, employers should be able to count their spending on health insurance for their employees — dollar for dollar — against the minimum wage increase. Specifically, all employers should be allowed to count up to $2.10 per hour per worker in health benefits toward meeting the minimum wage level. As a result, employers would not have to reduce health insurance benefits to meet the wage mandate.
Employees should also have the option of applying the minimum wage increase to their own expenses for health insurance. Employers who do not provide health insurance could set up a flexible spending account for employees at minimum cost. Employees could then use (potentially) taxable wage income to purchase nontaxed health insurance instead.
Market forces will largely neutralize the impact of a minimum wage increase, and the minimum-wage employee is unlikely to be much better off than before the increase. However, if the health insurance option is part of the legislation, it offers an opportunity to reduce rather than increase the number of Americans without health insurance.
[Matthew Hisrich, "The Uninsured in Kansas - A Closer Look," The Flint Hills Center, 28 July 2005.]
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