The Beacon Hill Report - March 20, 2014

Date: March 19, 2014

Related Content: News State Massachusetts

With the committee putting Speaker DeLeo’s plan to
raise the minimum wage into formal legislative language this week, the House of
Representatives will likely consider increasing the minimum wage to $10.50 over
the next two plus years – a 30% increase — very soon. The House version
appears to be better than the Senate plan in that future increases in the
minimum wage would not be tied to inflation and future legislators would be
forced to consider current economic conditions when increasing the minimum

In addition, the Speaker’s insistence on tying any
increase in the minimum wage to reforms to the state’s Unemployment Insurance
system to reduce costs for employers is encouraging. But in the end, the impact
on small business owners in certain industries from raising labor costs will
force small businesses to make difficult hiring decisions.

Because the proposed changes in the Unemployment
Insurance reforms fail to address the underlying problems with the system, they
cannot offset the substantial increase in labor costs imposed by the much
higher minimum wage. A recent study by the nonpartisan Congressional Budget
Office predicted more than half a million job losses nationally as the result
of a federal bill that would raise the minimum wage to $10.10 per hour. Since
all versions under consideration on Beacon Hill are more aggressive than the
federal plan, job losses would be at least as severe in Massachusetts and job
creation will be slower here.

Small businesses in certain industries cannot count
on a big increase in sales to accommodate higher labor costs will find a way to
reduce employment. They’ll eliminate positions, lay off workers, cut their
hours and look for ways to automate jobs to reduce their need for employees.
That is the way the economy works.

It is like a broken record for Massachusetts’ small
business owners but yet another study has concluded that health care costs in
Massachusetts – the highest in the world – are in crisis and need to be

The study conducted by the Healthcare Equality and
Affordability League states that persistent disparities in healthcare financing
have created an unsustainable system of significant annual increases in
healthcare premiums for middle-class and lower income populations and

The study looks at public policies, regulations and
market dynamics that create and worsen the

disparities and results over time. Since Medicaid
reimburses health care providers at rates below market rates, the study calls
for the equalization of government reimbursements among hospitals and increased
Medicaid reimbursements to hospitals that serve a high percentage of Medicaid
patients, typically community hospitals. The study also urges insurance
companies to offer lower premium health plans that reward employers and workers
who use cost-effective providers.

In other words, apply some free market forces,
competition and transparency to price and quality to drive consumer choice and
to reduce costs and premiums. What a surprise!       

Related Content: News | State | Massachusetts

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