Certainly proponents of this health care bill aren’t pushing the legislation with the intention of damaging the employment prospects of low-income workers. Yet they should be warned: multi-thousand page bills that empowers government to reorder one-sixth of the economy and create new rules and incentives for all of our employers have lots of unintended consequences.

And as John Goodman of the National Center for Policy Analysis demonstrates, this legislation will have the effect of discouraging employers from hiring or retaining low-income workers. It also contains provisions that make it more likely that low-income workers will lose their existing insurance than would higher-salaried workers, and creates oppressive marginal tax rates for those at the bottom of the income scale.

The NCPA explains:

  • Employers of low-paid workers would have an incentive NOT to provide insurance, because the workers could get much greater subsidies in the individual market ($19,400 compared to $2,295).
  • Employers of high-paid workers would have an incentive to KEEP providing insurance, because it’s tax-free and the workers wouldn’t qualify for subsidies anyway.

Employers’ subsidies are based on the average income of all their workers. So to take full advantage of the subsidies, Goodman points out:

  • Basically firms with high-income folks will fire their groundskeepers, maids, custodians, etc. and contract out that work to a firm that employs low-wage labor and provides no health insurance. …

Obamacare has another big problem:

  • The House version would create marginal tax rates in excess of 60 percent for workers earning as little as $25,000; this is caused by the steep withdrawal of health insurance subsidies (in the exchange) as income rises.

  • As is well known by economists and policymakers alike, when people get to keep only one-third of each extra dollar they earn, they react in all kinds of ways that are harmful to the economy; they will choose more leisure and less work.

Isn’t it time to go back to the drawing board on health care reform?