What explains this complete dichotomy in the labor market? Mulligan offers ObamaCare as a possible explanation. Here's why.
Although the health insurance mandate makes labor more expensive, it's one-health-plan, one-worker. The cost of health insurance is independent of the number of hours worked. So if an employer increases production by increasing the number of hours each worker works, there is no additional health care cost. On the other hand, if the employer hires additional workers, he must purchase expensive health insurance for each one of them.
The new health law, then, encourages businesses to expand by increasing the number of hours worked rather than by increasing the number of employees.
But isn't there some chance that the mandate to purchase insurance will be struck down by the Supreme Court this month? There is indeed. But this isn't necessarily helping the unemployed find jobs.
In my column last week, I pointed out that this recovery is one of the slowest on record. In fact, of the past eleven recessions, recovery from this one is the worst. Moreover, a major reason for the slow recovery is uncertainty. A new index that measures public policy uncertainty has been created by economists at Stanford University and the University of Chicago and it tracks back for almost 40 years. Unfortunately, the index has been at its highest levels ever during the years of the Obama presidency.
In fact, the uncertainty surrounding what ObamaCare will do (and whether it will come into existence at all) may have more negative impact on the labor market than the law itself.