What could have motivated the new California law, signed by Gray Davis in 2003, which compels any business with more than 50 employees to cover 80% of health care costs for their workforce? When this new mandate goes into effect in 2006, It will make California the first state in the nation to require employers to pay for health insurance.
A study by the Los Angeles Area Economic Development Corporation prices the mandates at $7.2 billion annually, with employers paying $5.7 billion, or 80%, and employees paying $1.5 billion.
In the past, when mandated healthcare has been put to the voters in the form of a ballot initiative, it has been defeated. In 1992, Proposition 166, an employer mandate on health coverage, lost 68% to 32%. In 1994, Proposition 186, a single-payer measure, went down 73% to 27%. Our far-left California legislature has now passed a law that it knows the people don’t want.
The law is driven solely by special interests, with no regard for the economic consequences. The AFL-CIO's John Sweeney pushed hard for this law in California, which exempts companies with union employees! Does John Sweeney care more about non-union employees than he cares about union employees? Not likely. No, his goal is to disadvantage non-union employers, like Wal-Mart, and thus slow the growth of non-union jobs.
For Mr. Sweeney, California is a test state. With this success, look for similar measures in other states. Something like it was the centerpiece of Richard Gephardt's Presidential platform, also designed with Big Labor in mind.
When it comes to anti-business regulations, California leads the nation. It is the only state that mandates paid family leave, the only state where family leave applies to small businesses, the only state with ergonomics regulations, and the only state with daily overtime rules. With such an anti-business climate, no wonder California trails the nation in growth and job-creation.
How many companies, as a result of the new requirements, will be unable to expand and hire new workers, or unable to raise wages for current employees. Some businesses might well leave the state altogether and head for more friendly business climates. California's corporate tax rate is 8.8%; Washington's and Nevada's are zero.
The laws of economics say that worker total compensation is dictated by market forces of supply and demand, and by worker productivity. When the state mandates one benefit, like healthcare, it must be paid for by a reduction of wages and other benefits. There is no alternative, no free lunch. Mandates represent a loss of freedom for both the employer and employee, and a gain in power by the state. You can not mandate prosperity.
My thanks to Richard Rider of Economy Telcom for some of the information contained here.