[Congressional Record Volume 140, Number 79 (Tuesday, June 21, 1994)]
[Extensions of Remarks]
[Page E]
From the Congressional Record Online through the Government Printing Office [www.gpo.gov]


[Congressional Record: June 21, 1994]
From the Congressional Record Online via GPO Access [wais.access.gpo.gov]

 
                           EMPLOYER MANDATES

                                 ______


                            HON. JIM SAXTON

                             of new jersey

                    in the house of representatives

                         Tuesday, June 21, 1994

  Mr. SAXTON. Mr. Speaker, the American people have heard a lot about 
mandates. They have heard about mandates imposed on States by the 
Congress to fund Government programs. And they have heard about State 
legislatures mandating services to be funded by local governments. Well 
today let me tell the American people about another mandate: the 
employer mandate.
  The employer mandate is the means which President Clinton has chosen 
to fund his health care plan. Simply stated, an employer mandate is a 
tax levied on small business by Uncle Sam. In other words, employers 
will be forced to fund their employees' health care premiums.
  Unfortunately, if Congress enacts President Clinton's employer 
mandate, forcing all small businesses to fund health care reform, two 
things will definitely happen.
  First, millions of jobs will be lost.
  And second, American workers' earnings will fall.
  If you do not want to take my word for this, maybe we should take a 
look at what other people are saying about the effects of an employer 
mandate on jobs.
  In fact, several weeks ago, I requested that the Republican staff of 
the Joint Economic Committee look into what people are saying about an 
employer mandate that forces small business to pay for its employees' 
health care and the resulting effects on jobs.
  And, so I am here this afternoon to release the study that the JEC/
GOP staff has completed.
  The report, entitled ``A Mandate for Destruction: Survey of Job and 
Wage Destruction That Will Result From Requiring Employers To Pay for 
Workers' Health Insurance,'' examines 41 different studies of the 
Clinton health care proposal and particularly the effects of employer 
mandates on jobs and wages.
  In fact, all economists agree that an employer mandate will raise the 
cost of labor. Firms will have to shift as much of the mandated costs 
back onto workers in the form of lower wages. And, to the extent that 
they are unable to shift the cost increase back to employees in the 
form of reduced wages, they will hire fewer workers and in some cases 
lay off others.
  Thus, employers and employees face a nasty trade off--job destruction 
or wage reduction.
  The JEC staff analyzed over 40 studies that vary widely in their 
methodologies and assumptions yet their findings are consistent and 
unambiguous. Employer mandates kill jobs--a lot of them.
  And as many of the reports show, it is the lowest wage earners who 
are most at risk of losing their jobs.
  As the charts show, estimated job losses range from a low of 600,000 
to a high of 3.8 million, with an average probable loss of 1.0 million 
jobs and an average potential loss of 2.1 million jobs.
  The Clinton administration itself admits that as many as 600,000 jobs 
could be lost. And we all know that if the White House is willing to 
admit this amount, that the true impact on jobs must be much higher.
  Specifically, one of the studies in the JEC/GOP Survey broke out 
estimates of the effects of a State-by-State basis and found, for 
example, that in 1998 New Jersey would lose 32,200 jobs, $3.6 billion 
in wages and benefits and $520 in income per person.
  In addition, the Governor's office in the State of California 
conducted a study that concluded that the job loss in California from 
the Clinton health care mandate would be so severe that they would 
exceed all the California jobs lost from defense cuts and would 
postpone the California economic recovery for years.
  And, the study finds that forcing all employers to pay insurance 
premiums would reduce wages--a lot--with the middle class taking a big 
hit. Americans making between $14,000 and $30,000 per year stand to 
suffer most of the estimated wage reductions from an employer mandate 
by losing $1,450 a year, on average.
  The verdict is in and the evidence is clear and convincing. Beyond a 
reasonable doubt that forced employer paid health insurance is a wage 
batterer and a job killer.
  The following is the introduction to the JEC/GOP survey:

Mandate for Destruction--A Survey of Job And Wage Destruction That Will 
  Result from Requiring Employers to Pay for Workers' Health Insurance


                              introduction

       This Survey reviews 41 sources, most of the studies and 
     reports known to the Joint Economic Committee Republican 
     (JEC/GOP) staff, that deal with the employment and wage 
     effects of an employer health insurance mandate. For 
     analytical purposes, most of the studies treat an employer 
     mandate like an increase in the minimum wage or as a payroll 
     tax increase.
       The studies that offer the most direct empirical estimates 
     of the cost of an employer mandate are summarized under ``Top 
     Ten Sources''; the ``Useful Sources'' section reviews studies 
     and reports that offer analysis, theory, or insight but few 
     numbers; and reports that do not deal directly with employer 
     mandates are classified under ``General Background Sources.''
       The Top Ten studies estimate probable job loss under an 
     employer mandate similar to that contained in the Clinton 
     health plan. Five of these studies (Sources 2, 3, 4, 7, and 
     8) restrict their analysis to the impact of an employer 
     mandate alone. The five other studies (Sources 1, 5, 6, 9 and 
     10) consider the effect of the Clinton plan in its entirety.
       Estimated job losses range from a low of 600,000 (RAND 
     Corp. [5]) to a high of 3.8 million (CONSAD Research Corp. 
     [6]), with an average probable loss of 1.0 million jobs. If, 
     for example, each restaurant in the country reduced 
     employment by just one worker, 300,000 jobs would be lost. 
     Table 1 summarizes the major findings on the impact of an 
     employer mandate on jobs.

    TABLE 1.--ESTIMATED EMPLOYMENT EFFECTS OF AN EMPLOYER HEALTH CARE   
                                 MANDATE                                
------------------------------------------------------------------------
   Study--Author/organization     Probable job loss   Potential job loss
------------------------------------------------------------------------
Office of Planning & Research/                                          
 State of California [source 1].          2,600,000            3,700,000
DRI/McGraw-Hill/CSE [2].........            659,000              908,000
O'Neill & O'Neill/EPI [3, 7, 8].    780,000-890,000            2,300,000
GOP Staff/JEC [4]...............            710,000    807,000-1,200,000
Klerman & Goldman/RAND [5]......            600,000  ...................
CONSAD Research Corp./NFIB [6]..            850,000            3,800,000
Fiscal Associates/NCPA [9]......            677,000              783,000
Vedder & Gallaway/ALEC [10].....          1,000,000  ...................
Average.........................          1,000,000            2,100,000
------------------------------------------------------------------------

       The range of the job loss estimates in Table 1 reflect the 
     uncertain manner in which an employer mandate will affect 
     employers and workers: An employer health insurance mandate 
     will raise labor costs to employers but they will backshift 
     as much as possible of their increased labor costs onto 
     workers in the form of lower wages. The less employers are 
     able to shift their increased labor costs back onto 
     employees, the more jobs will be destroyed. The corollary 
     finding is that the only way employers can refrain from 
     reducing employment in the face of an employer mandate is to 
     offset the increase in their labor costs by reducing wages. 
     Thus, employers and workers face a nasty tradeoff: Job 
     Destruction or Wage Reduction.
       The RAND study [5], which finds the smallest employment 
     effect of an employer mandate, assumes that 85 percent of the 
     increased labor cost resulting from the mandate is 
     successfully shifted back onto workers in the form of reduced 
     wages. CONSAD [6] estimates that 23 million affected workers 
     will experience a $28 aggregate annual wage reduction. Vedder 
     & Gallaway [10] estimate that the Clinton plan will decrease 
     wages by $93 billion in 1998, and the O'Neills [7,8] estimate 
     a $27 billion wage reduction per year. The State of 
     California [1] predicts a $68 billion loss in wages per year.
       While the lowest wage workers are most at risk to lost 
     their jobs as the result of an employer health care mandate, 
     workers making between $14,000 and $30,000 per year stand to 
     suffer most of the estimated wage reductions, losing on 
     average $1,450 a year. Table 2 summarizes the major findings 
     on the impact of an employer mandate on wages.

   TABLE 2.--ESTIMATED WAGE EFFECTS OF AN EMPLOYER HEALTH CARE MANDATE  
------------------------------------------------------------------------
                                                            Annual wage 
                                            Annual wage      loss (per  
       Study--Author/organization              loss          affected   
                                            (aggregate)     worker)\1\  
------------------------------------------------------------------------
Office of Planning & Research/State of    $68 billion...          $1,660
 California [1].                                                        
CONSAD Research Corp./NFIB [6]..........  28 billion....        \2\1,200
O'Neill & O'Neill/EPI [3, 7, 8].........  27 billion....             660
Vedder & Gallaway/ALEC [10].............  93 billion....           2,300
Average.................................  54 billion....           1,450
------------------------------------------------------------------------
\1\JEC/GOP staff calculation assumes 41 million affected workers.       
\2\CONSAD calculation assumes 23 million affected workers.              

       Several of the studies also estimate the impact of an 
     employer mandate on economic output. For example, DRI/McGraw-
     Hill [2] predicts that in the year 2000 GDP will be down by 
     $53 billion, and Fiscal Associates [9] estimates that GDP 
     will fall $90 billion by 1998 because of an employer health 
     insurance mandate.
       The studies in the Survey differ in crucial aspects. They 
     employ different statistical models, different wage 
     elasticities of labor demand and labor supply, and they treat 
     premium-shifting by employers differently. The studies make 
     different assumptions about the rate of growth of insurance 
     premiums, and posit different levels of assumed savings from 
     health care reform and other key variables. Yet, the studies' 
     findings are consistent and unambiguous: Employer Mandates 
     Destroy Jobs--a lot of them. Employer Mandates Reduce Wages--
     a lot.
       CONSAD Research Corp. [6] examined five major plans 
     introduced in the United States Congress and found that only 
     the Clinton plan produces substantial effects on employment 
     because it is the only plan that requires employers to pay 
     workers' health costs. Moreover, Andrew Dick [26] examined 
     the Hawaiian health care mandate of 1974 and found that the 
     employer mandate in that state did not significantly expand 
     insurance coverage to the uninsured.

                          ____________________