TeeJaw Blog

Looming “Unintended” Consequences of Obamacare

Posted in Culture, Economic Theory, Government and Politics by TeeJaw on Saturday, May 8, 2010, 11: 32 AM

One of the best quotes of all time is that of F.A. Hayek who said, “The task of economics is to teach men how little they know about what they imagine they can design.” Hayek spoke often of “spontaneous order,” that is an order that emerges without design or direction in the functioning of a political economy. Hayek believed that the voluntary interaction of free individuals acting in their own self interest would create order out of seeming chaos even though none of the actors had any intention of accomplishing any sort of order. The resulting order will build complex systems of greater utility and competence than those that may be created through a top-down design by any group of elite thinkers because no committee of wise men can ever posses all the information and wisdom of a free market, whether it be a market of goods and services or of ideas and inventions.

The Patient Protection and Affordable Care Act, better known as Obamacare, may be the ultimate exercise in the folly of believing that a better system can be designed by politicians and bureaucrats, acting in their self interest, than one that would evolve on its own by the free exchange of individuals. It may also be the apogee of left-wing assumptions that government has no interest of its own separate and apart from the interest of the people. If any good at all can come from Obamacare it may be to teach more Americans that those assumptions are wrong, indeed silly. Good government can be achieved only when every government action and every law passed by Congress is looked at from a different assumption, that it is just as likely to constitute an outrageous insult to the freedom and dignity of every citizen as it is to promote the general welfare of the Republic.

The “unintended” consequences of Obamacare are beginning to be understood. You may recall Nancy Pelosi’s brazen statement that, “We need to pass the bill so we can find out what is in it.” Think tanks and consulting firms were busily finding out what is in it since before it was passed, and now the rest of us are beginning to find out what is in it, and it isn’t good.

Diana Furchtgott-Roth is a contributing editor of RealClearMarkets and an adjunct fellow at the Manhattan Institute. She has written recently on one aspect of Obamacare that will make it more difficult for businesses to hire low-skilled workers.

She writes here:

Low-skilled workers have some of the highest unemployment rates in America. Adults without high school diplomas face an unemployment rate of 14.5%, almost three times as high as rates for college graduates, and well above the national average of 9.7%. The unemployment rate for teens, another low-skill group, is 26%.

Reasonable people likely presume that Congress and the administration are doing everything possible to help low-skilled workers get jobs [that wrong-headed assumption at work, tj].

But, come 2014, the new health care bill will make it harder for employers to hire low-skill workers. And, as workplaces around the country prepare to implement the Patient Protection and Affordable Care Act, employers are considering how best to comply. For some companies, that means that low-wage and part-time jobs will start to go, not in 2014, but now.

Furchtgott-Roth points out that Obamacare requires every employer with more than 50 workers to provide health insurance or pay an annual penalty of $2,000 per worker. The penalty will apply even for part-time workers subjecting the employer to the penalty for each “full-time equivalent worker,” a block of 30 weekly hours of part-time work by the same or different employees. Think about this a minute. A Federal law requiring employers to provide health insurance to its employees. Furchtgott-Roth asks, “What’s next? Car insurance and homeowners’ insurance.?” Where does the Federal government get the authority to make this requirement? It can be fathomed only by believers in unlimited government.

One way this hurts low-skilled employees the most is that employers can more easily cut the salary of higher-skilled workers to pay for their health insurance, but low-skilled workers do not command wages high enough to afford much in the way of cuts to pay for health insurance. Therefore, the cost of this mandate will fall entirely on employers creating an incentive to avoid hiring the low-skilled. Even if the employer were to pass some of the cost to the employee to make it easier to afford hiring them, Obamacare provides that health insurance premiums charged by employers to employees must not exceed 9.5% of their household income. Just how an employer is supposed to know what each employee’s household income might be remains a mystery.


With 15 million Americans out of work, and millions more discouraged job seekers withdrawn from the labor force, Congress and the administration should focus on getting people back to work. Instead, with the health care bill, Washington is condemning more unskilled Americans to the ranks of the unemployed.

I have used scare quotes in the phrase “unintended” consequences because it gets harder to believe the consequences are actually unintended as the hardship for the those on the lowest rungs of the economy piles up with every bit of government social engineering. When the lessons of history are continually ignored by the politicians and bureaucrats in charge one must either believe they know it and don’t care or they are stupid. It becomes easier and easier to believe that the desire to create a permanent underclass from which no upward mobility is possible outweighs any desire to do good, because that permanent underclass is such an effective tool for buying votes to perpetuate the power of the social engineers.

Companies with under 50 employees may have a competitive advantage over companies with over 50 (other things being equal) because they can hire low-skilled employees for a lower cost. But many larger employers are going to be shedding their employee health care plans anyway because the $2,000 fine is cheaper than health care, especially with the expected increase in health care cost that will come with Obamacare (anyone who doubts that Obamacare will increase costs is dreaming). This is not an “unintended” consequence. This is exactly the intended desired outcome. The ultimate goal is a single-payor system and the total elimination of all private health insurance.

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