The Labor Market Impact of Employer Health Benefit Mandates

Evidence from San Francisco¿s Health Care Security Ordinance

A key issue surrounding employer benefit mandates is the incidence on workers through wages and employment.

In this paper, researchers address this question using a pay-or-play policy implemented in San Francisco in 2008 that requires employers to either provide health benefits or contribute to a public option health plan. They estimate the impact on employment and earnings for the private sector overall, as well as for high impact sectors: retail and accommodation and food services. They have developed a novel approach for individual case studies by combining both spatial discontinuity in policies and permutation-type inference using other MSAs.

The study found that, compared to control counties, employment and earnings patterns in San Francisco did not change appreciably following the policy. This was true for industries most affected by the mandate, as well as for overall private sector employment. The results are generally robust to inclusion of different control groups, county-specific time trends, and varying pre-periods. In contrast to the small effects on the labor market, they did find that about 25 percent of surveyed restaurants imposed customer surcharges, with the median surcharge being 4 percent of the bill. These results indicate that while little of the burden of the mandate fell on San Francisco workers, approximately half of the incidence of the mandate fell on consumers.

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