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New Study: Health Insurance Mandates on Employers Hurt Low-Income Employees

For every 100 newly insured employees under a 'Pay or Play' law, 10 entry-level employees will lose their jobs

WASHINGTON, Nov. 9 /PRNewswire-USNewswire/ -- A new study presented as part of a Cornell University symposium finds that "Pay or Play" laws, which require employers to provide health insurance to their employees or a pay fine, will reduce employment for the least skilled members of the work force.

The study sponsored by the Employment Policies Institute and authored by Cornell University economists Richard Burkhauser and Kosali Simon, uses federal Current Population Survey data to calculate that for every 100 newly insured employees resulting from a "Pay or Play" law, 10 low-wage employees will lose their jobs.

"Pay or Play" laws are increasingly being proposed as a solution to America's healthcare crisis. At least a dozen state legislatures, including California, Maine, Illinois, and Minnesota, have seriously considered instituting a "Pay or Play" mandate. And all three Democratic presidential frontrunners -- Hillary Clinton, Barack Obama, and John Edwards -- include a version of "Pay or Play" in their healthcare reform platforms.

"The cost of providing health insurance is so great that most businesses covered by 'Pay or Play' laws will be forced to cut back on hours and jobs just to stay afloat," said Dr. Jill Jenkins, Chief Economist for the Employment Policies Institute. "As healthcare costs continue to rise, insurance mandates on employers will result in increasingly substantial job loss, with the most vulnerable members of the work force getting hurt the most."

Outside research by the Towers Perrin consulting firm estimates that in 2008 the average per-employee cost for an employer to provide health insurance will be $7,272 a year. The average business in the hotel and restaurant industry has a per-employee profit margin of $1,553, according to federal census data. That means the cost of providing insurance to an employee for a hotel or a restaurant could be up to 4.68 times higher than the profit that the average employee produces.

For a copy of the study, titled "Who Gets What From Employer 'Pay or Play' Mandates," visit

The Employment Policies Institute is a nonprofit research organization dedicated to studying public policy issues surrounding entry-level employment. For more information or to schedule an interview, please contact Tim Miller at 202-463-7650.

SOURCE Employment Policies Institute
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