By Miranda Everitt
Though not everyone knows it, everyone is familiar with externalities – the costs or benefits that one receives from a transaction they had nothing to do with. A positive externality? Think how pleased a gardener might feel about the local beekeeper’s activity, which indirectly (and at no cost to her) helps to pollinate her tomato plants.
A negative externality? Walmart workers on Medicaid.
The Affordable Care Act creates opportunities for states to expand the health-care safety net to protect low-wage workers – and that’s definitely a good thing for this growing segment of the economy. Yet it has already led to unintended consequences. By expanding the safety net without addressing underlying job quality, the act may give employers incentives to make some “bad jobs” (with low wages, no benefits, and no job security) worse.
“Bad jobs” in the food chain
Though we’re four years clear of the Great Recession, the majority of jobs created are some combination of part-time, temporary and low-wage. Where all three often align are in food chain jobs, like farm work (temporary and low-wage), waiting tables (usually part-time and low-wage) or grocery clerks (increasingly part-time and low-wage). The median wage for food chain workers is $9.65 – and 60% of workers are part-time.
Because of this, food-chain workers must rely more on the social safety net than workers in other industries. Nearly 28% of those workers use a government health insurance program like Medicare or Medicaid (known as Medi-Cal in California). That figure is less than 20% for the workforce overall.
Jim Araby, the director of the United Food and Commercial Workers Western States Council, recently spoke at UC Berkeley about the challenges and opportunities for low-wage workers (and labor unions) as the Affordable Care Act’s provisions begin to take effect. His union counts more than 160,000 members in California, employed in grocery stores, meat processing, retail drug stores and See’s Candies.
Obamacare on the ground
The Affordable Care Act includes a penalty for employers who don’t offer health insurance to workers considered full-time (defined in the law as 30 hours per week). The average employer cost of an individual health plan is about $4,885. The fine under the ACA? $3,000.
The math is fairly simple for employers paying low wages. Pay the fine, or cut hours to just under 30 per week. The Obama administration recently postponed enforcement fines until 2015, but some companies have already used the nebulous “costs of Obamacare” as an excuse to cut hours and benefits. Labor unions and worker advocates want to disincentivize this behavior, because it reduces the number of “good jobs” (full-time, with benefits) in the economy.
In California, individuals are eligible for Medi-Cal up to 133% of the federal poverty line. (That’s just under $26,000 for a family of three – and still more than the yearly pay of a minimum-wage worker even at California’s new $10 per hour rate.) Low-wage workers would qualify for the Medicaid expansion, and employers would save money on benefits.
Though states are insulated from many of the costs of “Obamacare” (the federal government is picking up 93% of the tab until 2022), the Medicaid expansion again highlighted the extent to which low-wage employers are subsidized by social safety nets. Araby and a coalition of labor groups worked to come up with a solution: a tax on employers whose workers must use public assistance to get by.
Assembly Bill 880 would have taxed employers with workers on Medi-Cal at 110% of the rate of commercial insurance. The law would have applied to employers with 500 workers or more – 1.4% of California companies.
Because California’s constitution requires a two-thirds votes to pass any tax, the bill would face a rough road in Sacramento. Although the 2012 election gave California Democrats the supermajority needed to pass new taxes like AB 880, “revenue solutions” were a tough sell. AB 880 needed a vote from every Democrat.
They made the “corporate welfare” case to moderate Republicans, and showed up at Walmart stores throughout the state at 5 a.m. with an “invoice” for their workers’ public assistance. The labor coalition also enlisted nurses and doctors to speak to the importance of quality health care.
In the end, AB 880 didn’t have the votes, but the labor coalition got a floor vote anyway so that legislators would have to record their stance. Three Democrats voted “no,” and six didn’t vote.
Though California’s supermajority rule makes any tax difficult to pass, other states don’t face the same hurdle. Several “trifecta” states, with Democrats controlling both houses and Democratic governors, have the opportunity to pass just such a bill.
AB 880 will be introduced again in the legislature next year, concurrent with a ballot campaign. Though Araby says he prefers not to make law through the California constitution, the public attention and pressure of a ballot campaign may persuade a few legislators to get on board with the bill. This strategy could also bring in new allies who would prefer a fight in the legislature to a very public one with every California voter in 2014. I’ll be watching.
Miranda Everitt is a first-year MPP student at the Goldman School of Public Policy.
More than 1 in 7 jobs in America are somewhere in the food chain. That’s why so much of the focus of Saru Jayaraman’s Food Systems Policy class is on the people who work to produce and serve our food. Jayaraman has invited a slate of practitioners and advocates to speak to her class and the public. Upcoming speakers include Central Valley Teamsters political director Doug Bloch, “Food Politics” author Marion Nestle, “Diet for a Hot Planet” author Anne Lappe. For details, email email@example.com.