Fundamental Health Reform Like ‘Medicare for All’ Would Help the Labor Market

By Josh Bevins – Published March 2020 in Economic Policy InstituteSubscribe to the WFMonitor eNewsletter

This Economic Policy Institute report argues that reforming the current U.S. healthcare system to a “Medicare for All” (M4A) structure would lead to a more efficient labor market, strengthening the national economy. Reductions in employers’ costs for health insurance from an M4A reform would remove financial barriers to entrepreneurship and increase the competitiveness of small businesses. Furthermore, predicted increases in labor demand, take-home pay, and job quality would provide a net-benefit to most American workers. 

Background
Based on a 2019 report, “roughly 23 million Americans between the ages of 19 and 64 are uninsured, and another 64 million are underinsured.” In addition, insurance premiums and overall spending on prescription drugs have experienced significant annual increases. According to international evidence, “a key component of controlling cost growth is a strong public role in setting and negotiating the prices of healthcare goods and services.” 

Higher Cash Wages & Salaries
Through the reduction of healthcare insurance costs, employers would have the opportunity to invest more in wages for employees. “The share of total annual compensation paid to American employees in the form of health insurance premiums rather than wages and salaries rose from 1.1% in 1960 to 4.2% in 1979 to 8.4% in 2018.” Further, “if this post-1960 increase had been only half as large,” and employers conferred those cost savings to wages and salaries, the take-home pay of the country’s workers would have been approximately $400 billion dollars higher in 2018. 

Increased Availability of Well-Paying Jobs
According to Schmitt and Jones (2013), by implementing universal health care coverage, the probability that any given job in the labor market offers a wage of at least $21.07 per hour and provides health and retirement coverage would increase by 20%. Also, for women workers, the boosts in job quality would be even higher as women are less likely to receive employer-sponsored health insurance coverage.  

Delinking Employment from Health Insurance Coverage
A Medicare for All system would end employment as a requirement for health coverage for millions of Americans. With access to health and retirement security, workers have more freedom to pursue jobs that better fit their skill sets. Baker (2015) found that “job lock,” a situation where workers stay in their current position to avoid losing employer-sponsored insurance, may reduce the annual turn-over rate of prime-aged workers by approximately 4%. 

Benefits for Small-Businesses and Start-Ups
Compared to countries like Spain, France, and Germany, the U.S. has a low share of self-employed workers. Nearly universal healthcare in these European countries significantly reduces start-up costs for small businesses. In addition, a universal healthcare system would help level the playing-field for small businesses’ recruitment of employees. According to a previous EPI analysis, “the cost of providing healthcare coverage is significantly higher for small companies.” 

More Public Spending Would Boost National Aggregate Job Demand and Create Jobs
According to Bevins, “unemployment is almost entirely a function of the level of aggregate demand: spending by households, businesses, and governments.” Further, “health insurance coverage expansions of M4A will boost demand for health care goods and services, and workers will need to be hired to meet this demand.” A study by Pollin et al. (2018) found that “expanded access to healthcare could increase demand for health services by up to $300 billion annually…this would translate into increased demand for 2.3 million full-time-equivalent workers in providing healthcare.” Additionally, M4A has plans to pay for long-term care services. Reinhard et al. (2019) found, based on 2018 labor market information, that “Americans provided roughly 34 billion hours in unpaid long-term care.” If 10% of this reported long-term unpaid care conferred to new jobs, “it would create enough new demand for workers to essentially offset the displacement of workers in the health insurance and billing administration sectors.”

Involuntary Job Losses as a Result of M4A Would be Minimal
Pollin et al. (2018) also found that up to 1.8 million jobs in health insurance and billing administration would be at risk of layoffs as a result of M4A. If the 1.8 million workers Pollin et al. (2018) identified were laid off, it would account for about 2% of the national layoff rate based on 2018 Bureau of Labor Statistics data. However, the productivity gains resulting from job displacement within a given economic sector (like healthcare) would “boost job growth in other sectors.”

Subscribe to the Workforce Monitor eNewsletter to receive weekly briefs on Credentials and the Future of Work.