Niagara Gazette

July 17, 2013

CONFER: Competition under the employer mandate

By Bob Confer
Niagara Gazette

Niagara Gazette — Much has been said over the past few years about Obamacare’s employer mandate and what the new cost structure will mean to compliant businesses which will be forced to charge higher prices for their products to cover their newfound, or higher, health care expenses. Those costs can be dangerous for those businesses when competing against manufacturers from other nations which already lack some of the cost and regulatory burdens that our producers face.

Surprisingly little has been said about another competitive factor, one which affects domestic operations — labor.

Just as businesses compete against one another for market share in shared and similar industries, they also compete against one another across multiple industries for labor. In order to fashion the highest-quality goods and services, employers have to attract and retain the best labor possible for the best accumulated cost that their customers are willing to pay as a component of the end product’s selling price. By “accumulated cost,” one has to consider everything that goes into the price of labor for an employer. It’s not just the wage rate; it’s also paid holidays and vacations, workers comp and disability insurances, pensions or 401(k)s, and health insurance.

Since the Second World War, when our government interfered in free markets and froze wages, health insurance has been perhaps the most important of those cost factors —those marketing tools — that employers use to bring the best workers into their organizations and keep them there. The competitive worker knows health care’s value isn’t chump change; the typical single plan has an annual cost in excess of $4,000 while double plans exceed $8,000 and family plans surpass $11,000. So, if he discovers that a large portion or all of his health insurance will be paid for by an employer, he will choose that firm over another of similar — or even higher — wage and often entirely dissimilar industries.

But, now, after using health insurance as a competitive tool for more than 70 years, market sectors and employers that had rewarded talent — and found it and kept it — will no longer be able to do so with those methods. Under the employer mandate, those once-differentiated employers will be no different than anyone else. Most every business of any size will be doing what they once did. When this portion of Obamacare goes into play (2015), business with 50 or more full-time employees will, by law, have to pay for their health insurance and the cost passed on to their workers cannot exceed 9.5 percent of the employee’s total household income.

So, with the uniqueness of insurance no longer at their disposal, what will those employers do to remain competitive in the labor market? That’s a very difficult question to answer. There are hundreds of thousands of companies across the nation looking for an answer, any answer.

Cheerleaders for Obamacare will likely respond that it will cause those employers to increase wages. But will it? The answer is “no”, because those employers already have defined cost structures and, more than likely, are selling their products at the best possible price. They can’t increase their selling prices to accommodate new or increased labor costs and benefits just because other employers (in entirely different industries) had to increase their costs. If they do that, they won’t be very competitive selling their wares in the global marketplace. Then, no one will have access to private health insurance because no one will have a job.

Gasport resident Bob Confer also writes for the New American magazine at TheNewAmerican.com. Follow him on Twitter @bobconfer

Gasport resident Bob Confer also writes for the New American magazine at TheNewAmerican.com. Follow him on Twitter @bobconfer