Increase in Health Care Costs Causes Job Loss

January 25, 2006 ( - A study released today by the Employment Policies Institute reveals that as the cost of health care rises, businesses try to keep labor costs in check resulting in job loss and involuntary part-time employment concentrated among low-skilled employees.

Study authors, economists Dr. Katherine Baicker, a current member of the President’s Council of Economic Advisors, and Dr. Amitabh Chandra of Harvard University, found that a 20% increase in health insurance premiums would reduce the probability of being employed by 3 percentage points – the equivalent of approximately 4 million employees nationwide losing their jobs. They also found that the job loss was concentrated among low-skilled employees, according to a press release on the study.

In addition, the authors found that low-skilled employees were more likely to have their employment reduced involuntarily from full-time to part-time as a result of employer health care cost increases. According to the release, the study found that a 10% increase in insurance premiums results in a wage reduction of approximately 3.4%, which equates to approximately a $2,000 loss in annual income, for those receiving coverage through their employer.

Richard Berman, executive director of the Employment Policies Institute, said in the release that the implications of this study reveal the problem with employer healthcare mandates, like that recently passed in Maryland (See Veto of ‘Wal-Mart Bill’ Overridden in MD Senate). “Ultimately, the cost of insurance premiums is passed on to the employees in the form of job loss or involuntary part-time employment,” he said.

Another study recently released by the Institute indicated that health care mandates do little to increase the number of uninsured (See Mandates for Employer Health Care Hardly Reduce Number of Uninsured).

The full study report is here .