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Side Effects: Fewer Flippin’ Hamburgers at White Castle

Kathryn Nix
The Foundry, The Heritage Foundation
May 17, 2010

Yesterday we saw how Obamacare is leading large employers to contemplate dropping their coverage of employees. Today we learn it will cripple businesses’ ability to create jobs for entry level workers.

Thanks to Obamacare, low-skilled job seekers will find it even harder to find work. And low-income areas will find it even more difficult to attract new businesses. That’s the lesson drawn from a new analysis by White Castle, the iconic hamburger chain.

Numbers crunchers there looked at how Obamacare provisions would affect the company’s bottom line. Of particular interest were provisions that hit employers with a $3,000 per employee penalty—even if they offer health insurance—for workers whose household income is low enough and they get subsidized health coverage through a government-run insurance exchange.

Curiously, the penalty for hiring and offering coverage to a low-income worker is 50% higher than the Obamacare penalty ($2,000 per employee) for NOT offering coverage.

The net effect of this weird policy is to discourage businesses from hiring workers from low-income households—those who need jobs most. According to White Castle’s Jamie Richardson, Obamacare “makes it difficult to justify growing where jobs are needed most—in lower income areas.”

Heritage analyst Robert Book warned of this months ago. “The Senate health care bill discourages companies from hiring those who need jobs the most and encourages employers to lay off people with family members who have also lost their jobs. The bill punishes employers who hire or retain those workers anyway and harshly punishes employees who have “too many” co-workers from low- and moderate-income families.”

Book predicted: “The net result would be higher unemployment for low- and moderate-income families and higher health insurance costs for their co-workers—the exact opposite of what the bill’s proponents claim is their goal.”

As the White Castle report shows, Obamacare is more likely to hurt than help low-income workers. Additionally, employer penalties create incentives to drop coverage altogether, making a mockery of President Obama’s promise that “if you like it, you can keep it.”

If employers drop coverage and dump their employees into the exchange, low-income workers will receive generous government subsidies to buy insurance. Everyone else will be left to face the expense of health insurance on their own—no help from employers, and even less help from the government (zero) than they had before with the ability to use pre-tax dollars.

To learn about the right way to extend government assistance to purchase insurance to all Americans (and pay for it, too), click here.

Related Content

Junk Economics: A Closer Look at Those Shocking Health Insurance Profits
Robert Book, Ph.D., The Foundry, The Heritage Foundation, 05.17.2010

More Inconvenient Obamacare Truths
Conn Carroll, The Foundry, The Heritage Foundation, 05.03.2010

Side Effects: The Beginning of the End for FSAs
Richard Sherwood, The Foundry, The Heritage Foundation, 04.29.2010


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