Study: ObamaCare will lower wages, especially among poor

posted at 2:15 pm on August 7, 2009 by Ed Morrissey

A new study by Steven Nyce and Sylvester Schieber for think tank Watson-Wyatt on the long-term effects of Barack Obama’s health-care reform plan shows explosively bad results that mainly impact lower-income workers.  The Watson-Wyatt study uses five scenarios using differing versions of ObamaCare floating around Capitol Hill to determine the impact of nationalizing the health-care industry on real compensation to workers.  The lack of real cost controls will force a regressive impact on compensation and worsen the very problem the Obama administration proposes to resolve (emphases mine):

Under an assumption that we control health cost inflation but expand coverage by means of an employer play-or-pay mandate, the effect on wage growth patterns would be negative at the bottom of the earnings distribution and mildly negative in the middle of the earnings distribution for a while. But after 2015, wage growth rates would return to the healthier levels of the 1990s.  Bringing health costs under control allows more resources for expanded coverage.

If we expanded health insurance coverage but our current health cost inflation rate continued unabated, the higher overall costs would result in falling wages at the bottom of the earnings spectrum and very slow wage growth on up the earnings distribution. These dismal wage outcomes would persist over at least the next couple of decades, possibly longer.

The next scenario considers the real possibility that health inflation increases as a result of expanded insurance coverage offered under reform. Looking back at the implementation of Medicare, this is exactly what happened. This scenario combines expanded health care coverage with accelerated health inflation rates. In this case, the higher costs would drive disposable wages downward across most of the earnings spectrum, although the declines would be steepest for lower-earning workers. These depressed conditions would persist over the entire projection period.

The Medicare example is particularly instructive.  Instead of reducing consumption, Medicare increased consumption while limiting resources.  Any Econ 101 student could have predicted that increasing consumption while limiting resources would result in higher prices, as well as eventual rationing.

Moreover, the emphasis on fixing the health-care system through top-down employer mandates from government will mean fewer jobs as businesses absorb more costs.  If employers cut back on staff in order to keep costs in line, that puts more people in the labor pool competing for fewer jobs at almost all strata of employment.  On lower-skilled jobs, the competition will become more fierce, which will drive down wages.  Again, this is pretty much Econ 101.

Keith Hennessey looks at the same study and expands on its analysis:

Let’s put this into sentence form:

  • If health care reform finances universal coverage primarily through a mandate to buy health insurance, and if health cost growth continues as it has in recent years, a median worker’s real wage growth rate would be more than cut in half.
  • If health care reform instead accelerates health cost growth because expanded insurance coverage means more health services are consumed, that same median worker would see his real wages shrink.
  • For lower-wage workers the picture is worse.  If health care reform finances universal coverage primarily through a mandate to buy health insurance, and if health cost growth continues as it has in recent years, a worker in the 3rd income decile would see no real wage growth.
  • And if health care reform instead accelerates health cost growth because expanded insurance coverage means more health services are consumed, that same low-wage worker would see his real wages shrink dramatically.

In other words, it will make workers poorer, and poorer workers even more poor. Read all of Hennessey’s post and the study to see what a disaster ObamaCare will be for the very people it purports to protect.


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and middle class = poor.
and upper middle class = middle class.
and rich = upper middle class.
and politicians = rich.

Yeah that about sums it up.

upinak on August 7, 2009 at 2:18 PM

Who cares? I heard opponents were ‘orchestrated’ by a facebook group with 23 members

STOP TALKING AND SHUT UP!

battleoflepanto1571 on August 7, 2009 at 2:18 PM

This is pretty fishy.

I think I should report this to the White House Ministry of Information Refutation.

Enoxo on August 7, 2009 at 2:19 PM

So they are more guaranteed to need public assistance and thus vote democrat?

Hey. That’s a good idea. – Democrats.

lorien1973 on August 7, 2009 at 2:21 PM

In other words, it will make workers poorer, and poorer workers even more poor.

Lovin’ that hope and change, how about you?
/sarc

cmsinaz on August 7, 2009 at 2:21 PM

poorer workers even more poor. I can jive with that.

Obamacare= bad idea.

Why is obama against the poor?

ted c on August 7, 2009 at 2:21 PM

I vote that we replace the word “study” in the headline with the words “no sh*t, Sherlock.”

Vic on August 7, 2009 at 2:21 PM

Yeah cause they’ll probably lose their jobs because the employers can’t afford the health insurance.

gophergirl on August 7, 2009 at 2:22 PM

Read about the death of the middle class in europe and you’ll see they see this as a feature, not a bug. Seriously.

lorien1973 on August 7, 2009 at 2:22 PM

You have been reported.

BPD on August 7, 2009 at 2:22 PM

Vic on August 7, 2009 at 2:21 PM

second

cmsinaz on August 7, 2009 at 2:22 PM

This is all wrong. It assumes that the worker owns the money he has. He does not. All wages belong to the state who will decide the equitable distribution between the worker and government.

highhopes on August 7, 2009 at 2:23 PM

And as the leftists rebutted -

B-b-but, centralizing the health care system will save 31% of the overall health care costs due to better efficiency!

Skywise on August 7, 2009 at 2:24 PM

It will also send many small business owners into bankruptcy, eliminating more jobs.

OmahaConservative on August 7, 2009 at 2:24 PM

what a rope a dope. Give you healthcare you don’t want and can’t use. Tax the hell out of you. Make you poor, then give you no choice but to vote Democrat just so you can keep your free guvmint cheese ….

what fools sign up for this.

ted c on August 7, 2009 at 2:24 PM

This is all wrong. It assumes that the worker owns the money he has. He does not. All wages belong to the state who will decide the equitable distribution between the worker and government.

highhopes on August 7, 2009 at 2:23 PM

Chocolate rations were increased today…

Skywise on August 7, 2009 at 2:25 PM

Cupcake rations were raised for a second straight quarter.

daesleeper on August 7, 2009 at 2:28 PM

Well the President is very concerned remaking the foundations of the country so no one earns any inflated profits….

clorensen on August 7, 2009 at 2:28 PM

All of this said, on the assumption that Obama sincerely wants to help anyone, but himself, and his cronies.

This is exactly what he wants. All of us beholden to him, for everything from our underwear, our health, our wages, and our very existence.

None of what he’s doing is meant to help anyone, to prosper, be more healthy, be more educated, or be free. This is all about him gaining control, and keeping it, with Nancy helping it along. This is why they wanted it rushed.

If this is really what you want for your lives, and the lives of those you love, and care about, or those of the future, then by all means, support this crap. If not….stay united, and speak loud, and clear….NO!!!!!!

capejasmine on August 7, 2009 at 2:29 PM

Sebelius conference call going on now. Call in participants are required to give the name of their local union before being allowed to join the call.

I guess the rest of us should just shut up.

LASue on August 7, 2009 at 2:30 PM

If anyone else wants to try, here is the call in info:

Dial 1-888-567-1599 and
2. When prompted, enter access code 9363997

LASue on August 7, 2009 at 2:32 PM

That’s the plan. More people dependent of King Barack and his merry band of thieves.

tru2tx on August 7, 2009 at 2:32 PM

of = on

crap.

tru2tx on August 7, 2009 at 2:33 PM

Sebelius conference call going on now. Call in participants are required to give the name of their local union before being allowed to join the call.

I guess the rest of us should just shut up.

LASue on August 7, 2009 at 2:30 PM

Tell me that’s exaggeration and you’re joking.

Enoxo on August 7, 2009 at 2:33 PM

Subsidized housing, health care and food stamps for everyone.

mchristian on August 7, 2009 at 2:36 PM

After recently raising the federal minimum wage this should be just what it takes to get even with those dunderhead employers who keep hiring people and operating businesses and developing wealth! Once we get those troublemakers out of the picture we can implement the next step in our Final Solution in our War on Prosperity.

Tom_OC on August 7, 2009 at 2:36 PM

This ought to be a more important story than the budgetary debate on Capitol Hill. Even if they find enough revenue offsets to make the bill “deficit neutral” it doesn’t eliminate the cost — it just passes it along to workers in the form of lower wages.

This is potentially the most important finding so far. Will be interesting to see how much press coverage it generates.

Chuckles3 on August 7, 2009 at 2:36 PM

FACTS DO NOT MEAN ANYTHING, I AM OBAMACLES!

//Ogabe

sven10077 on August 7, 2009 at 2:36 PM

Will be interesting to see how much press coverage it generates.

Chuckles3 on August 7, 2009 at 2:36 PM

Prediction: Zero

lorien1973 on August 7, 2009 at 2:36 PM

Sebelius conference call going on now. Call in participants are required to give the name of their local union before being allowed to join the call.

I guess the rest of us should just shut up.

LASue on August 7, 2009 at 2:30 PM

Why are only union members allowed to talk to a public official about public policy?

Skywise on August 7, 2009 at 2:38 PM

No joke, but I just got on.

Introductory comments note that for a “hundred” years, they (the unions) have been trying to obtain “comprehensive” health care reform to provide insurance for every “resident” of the US.

Not an auspicious start….

Sebilius on now.

LASue on August 7, 2009 at 2:38 PM

No joke, but I just got on.

Introductory comments note that for a “hundred” years, they (the unions) have been trying to obtain “comprehensive” health care reform to provide insurance for every “resident” of the US.

Not an auspicious start….

Sebilius on now.

LASue on August 7, 2009 at 2:38 PM

Link? The video on healthreform.gov is down

Enoxo on August 7, 2009 at 2:39 PM

ObamaCare will lower wages, especially among poor

Well then, I guess we’ll just have to increase the minimum wage — again, require a set minimum work week, institute a government review of all layoffs and terminations, and while we’re at it, require a universal employer paid benefit package.

That should work just peachy.

Terry_Dyne on August 7, 2009 at 2:40 PM

Well didn’t the ‘poor’ vote for him en masse? This is obviously what they wanted. Give it to them.

Monica on August 7, 2009 at 2:40 PM

and middle class = poor.
and upper middle class = middle class.
and rich = upper middle class.
and politicians = rich.

Yeah that about sums it up.
upinak on August 7, 2009 at 2:18 PM

To abreviate your post even more we will be reduced to the ruling class and the ruled class.

fourdeucer on August 7, 2009 at 2:41 PM

Docs in Houston jam healthcare meeting. THEY DON’T WANT IT!!!! They need to SHUT UP and GET OUT OF THE WAY!!!

bloggless on August 7, 2009 at 2:43 PM

In other words, it will make workers poorer, and poorer workers even more poor.

Obama: “Tell me something I don’t know, chumps!”

LibTired on August 7, 2009 at 2:43 PM

http://www.chron.com/disp/story.mpl/metropolitan/6563705.html

FORGOT THE LINK. HE’S PISSING OFF THE DOCS NOW. WHERE’S THE AMA?

bloggless on August 7, 2009 at 2:43 PM

…and worsen the very problem the Obama administration proposes to resolve

That’s our Obama! *cue laugh track*

cjtony97 on August 7, 2009 at 2:45 PM

The libs want a caste system. One caste, a protected class of the wealthy and politically connected, and the rest rabble whom they can tell what to eat, how to dress, where to go, what to say, what pills to take and when to die. It’s all very muslim.

LibTired on August 7, 2009 at 2:46 PM

FORGOT THE LINK. HE’S PISSING OFF THE DOCS NOW. WHERE’S THE AMA?

bloggless on August 7, 2009 at 2:43 PM

They’re under the podium, wiping their chins.

Monica on August 7, 2009 at 2:47 PM

Where is VP Joe Biden? I’m sure he can give us some straight talk on this mess that Bush created and has somehow kept going even though he has been out of office for six months.

Dire Straits on August 7, 2009 at 2:51 PM

Obamacare is already making me sick to my stomach.

silverfox on August 7, 2009 at 2:51 PM

I can spin this a somewhat positive information.

You see, after all of the aspersions cast upon the rich, I no longer hope to one day become rich. Decreased wages pretty much ensure that I will never be rich, so, good news.

myrenovations on August 7, 2009 at 2:57 PM

Wait a minute….Are you trying to tell me this won’t have the same positive effect that welfare does on the poor? Say it ain’t so.

kriscoleman on August 7, 2009 at 3:00 PM

A “regressive” effect on wages? Why aren’t “progresives” up in arms over that?

In any case, I work in the medical-industrial complex, and I expect Obomba Care to kill my job outright. That will most certainly have a negative effect on my wages.

NeighborhoodCatLady on August 7, 2009 at 3:00 PM

Sebelius conference call going on now. Call in participants are required to give the name of their local union before being allowed to join the call.

I guess the rest of us should just shut up.

LASue on August 7, 2009 at 2:30 PM
Why are only union members allowed to talk to a public official about public policy?

Does this question actually need a response? Although there are many correct answers, I’ll go with Sebelius is a gutless coward.

kriscoleman on August 7, 2009 at 3:04 PM

DAMN IT!!!!

When will you racist mobsters learn that 1+1 really does = 3.

Perhaps, a trip or two to the reeducation camps will get you minds correct.

jukin on August 7, 2009 at 3:10 PM

A “regressive” effect on wages? Why aren’t “progresives” up in arms over that?

NeighborhoodCatLady on August 7, 2009 at 3:00 PM

Because those progressives in positions of power want to be the only progressives, being progressed. To hell with anyone else.

capejasmine on August 7, 2009 at 3:20 PM

I need a drink.

TXMomof3 on August 7, 2009 at 3:22 PM

COC – Obama has surely read Saul Alinsky’s Rules for Radicals, but I haven’t, but yet, I’m part of the radical MOB.

kirkill on August 7, 2009 at 3:24 PM

My Insurance agency sells both P&C Insurance and Health Insurance. If this passes we anticipate losing 3 employees once the effects of it hit market. I can’t imagine what this will do on a nationwide scale.

MichiganMatt on August 7, 2009 at 3:25 PM

I saw Ed on a webcast once. He was quite well dressed. Therefore he is lying.

angryed on August 7, 2009 at 5:39 PM

Well duh…this one’s easy. Congress will just have to raise the minimum wage to $25/hr.

See…simple.

29Victor on August 7, 2009 at 6:42 PM

Sounds like what they’re saying is: health care will continue to take an increasingly large part of your income under ObamaCare, you’ll just see it in lowered wages instead of higher insurance rates. And the lower wage earners who might have opted out of health insurance to spend their money on other things (like food or rent or shoes for the kids) won’t have that option anymore, the government has made that life decision for them.

Is this a great country, or what?

Socratease on August 7, 2009 at 8:32 PM

Right niow, they raise minimum wages. That gives an employer higher cost. Add health insurance and it may increase the employee cost by 4 more dollars an hour. so now the employer both increases payroll deduction for insurance and lays people off. we will have a drastic cut in disposable income. But they are only talking about tax increase. If we have sharp drops in take home pay, the consumer spending dips. Obama sweet talks and defies basic economic principles daily. So we see 3 million more at home watching oprah.

seven on August 8, 2009 at 10:30 AM