John C. Goodman

The most important feature of President Obama’s “jobs speech” to Congress last week is this: For the first time in his presidency Barack Obama actually sounded like he really and truly believes that economic incentives matter in the labor market.

Forget the details of the proposals for a moment. They may or may not stand up to scrutiny. Underlying all of the president’s new ideas is a common theme: to encourage employers to hire more workers, we need policies that reduce the cost of labor. It’s the basic law of demand all students learn in Econ 101. If something is less costly, people (in this case, employers) will buy more of it.

Why is this principle so important? Because the first two and one half years of the Obama presidency has been nothing less than all-out war on job creation of any sort. Virtually every major domestic program this president has endorsed will make hiring new workers more expensive, and therefore less likely.

Take ObamaCare. Beginning in 2014 most employers will be required to provide very expensive health insurance coverage for their employees or pay a fine if they fail to do so. The Congressional Budget Office estimates that the required family coverage will cost close to $15,000. That’s equal to almost half the annual wages of a $15-an-hour employee — the equivalent of a $6-an-hour health care minimum wage!

Employers may be tempted to avoid that cost by shelving the health insurance and paying a $2,000-per-worker fine. But if a lot of them do that, does anybody seriously think the fine is going to remain that low? The $2,000 penalty is just the opening bid, needed to get the original ObamaCare law passed by Congress. The history of employer penalties suggests that they don’t tend to diminish over time.

By way of contrast, consider the temporary payroll tax reduction, enacted last year to encourage hiring. President Obama wants to extend it going forward, and that’s probably a good idea. But for a $15-an-hour worker, that tax relief equals about 30 cents an hour. When you combine the 30 cent payroll-tax-cut carrot with the $6 mandated-health-insurance stick the employer incentive is overwhelmingly against hiring more workers.

The new health reform law is just one example of the anti-job, anti-labor agenda of the Obama administration. From environmental law to regulatory policy to tax and labor law, virtually every domestic policy the White House favors will make hiring someone more expensive and less attractive than it otherwise would have been.


John C. Goodman

John C. Goodman is President of the Goodman Institute and a Senior Fellow at The Independent Institute. He is the author of the widely acclaimed book, Priceless: Curing the Healthcare Crisis. The Wall Street Journal and National Journal, among other media, have called him the "Father of Health Savings Accounts.”

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