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The Senate's awful free rider provision likely to survive negotiations

It looks like the House's employer mandate is going to fall to the Senate's free rider provision. The free rider provision -- which I'd previously called "the worst policy in the world" -- has been improved over its earlier incarnations, but is still a bad, complicated approach that will make it cheaper for many employers to hire, say, a 20-something on his parents’ insurance plan than a 40-something who'll need to go to the exchanges. To put it another way, the problem isn't that it makes labor more expensive. It's that it makes different job applicants unequally expensive, and thus could lead to labor discrimination.

More on that here. On the bright side, economist Austin Frakt doesn't seem so worried.

By Ezra Klein  |  January 13, 2010; 5:33 PM ET
Categories:  Health Reform  
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Frakt is right. It is easy to overplay the labor market distortions here but I seriously doubt they will come into play in any meaningful way. From a benefit cost perspective it is already cheaper to hire a 20 something than a 40 something. Do recruiters consider this? I doubt it. They are looking to find the best applicant for the job from a skills, operational and productivity perspective. Benefit costs do not enter into the hiring decision and this minor free rider tax won't change that much.

Does it create an additional distortion? Technically, yes, but of all the issues in the bill, this is not a hill we want to die on.

Posted by: scott1959 | January 13, 2010 5:53 PM | Report abuse

This was expected since the so-called centrists are all about shielding business owners. It is unfortunate however. Consider the typical restaurant franchise with 50 or more employees. They're already used to less than 40 hour workweeks as a way to avoid overtime. Keeping the hours limited will also allow them to completely dodge the mandate. (incidentally, Frakt is mistaken: the bill defines full time as 40 hours not 30. Not sure if that would change his analysis.)

Posted by: bmull | January 13, 2010 5:56 PM | Report abuse

Eagerly awaiting your arguments for why liberals should support "the worst policy in the world"!

Posted by: Ulium | January 13, 2010 10:19 PM | Report abuse

dangit ezra, you're supposed to explain it nicely on here instead of just linking to the cbpp. i love your site because that's what you usually do! please lay it out for us on here.. especially since you laid out how bad it was previously. you made me very scared of it back then, and now i need to know what's up!

Posted by: schaffermommy | January 14, 2010 2:15 AM | Report abuse

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