Reactions to the Employer Mandate in Washington State’s Labor-Intensive Agriculture Industry

Reactions to the Employer Mandate in Washington State’s Labor-Intensive Agriculture Industry

Bidisha Mandal, Associate Professor, School of Economic Sciences, Washington State University, Michael Brady, Associate Professor, School of Economic Sciences, Washington State University, Karina Gallardo, Associate Professor, School of Economic Sciences, Washington State University
After the Affordable Care Act was signed in to law in 2010, how we access health care and insurance began to change in the US. One of these changes is the “employer mandate,” which went into effect in 2016. The employer mandate says that businesses with 50 or more full-time employees must provide health insurance for those employees. In industries like agriculture, which rely heavily on seasonal and part-time workers, the employer mandate impacts business. This publication outlines the results of a survey conducted prior to the implementation of the employer mandate to gain insight into how agricultural firms in Washington State might respond.
Section 3 Lorem ipsum dolor sit amet, consectetur adipiscing elit. Mauris sit amet pulvinar massa, vel suscipit turpis. Vestibulum sollicitudin felis sit amet mi luctus, sed malesuada nibh ultricies. Nam sit amet accumsan dui, vitae placerat tortor. Vestibulum facilisis fermentum dignissim. Maecenas ultrices cursus diam, eu volutpat urna viverra non.

Page:

...

Summary

The employer mandate is one of the key features of the Affordable Care Act of 2010. This report presents findings from a survey of agricultural firms about their perceptions of the employer mandate. In 2014, just prior to the implementation of the employer mandate, we conducted a survey of producers and processors of labor-intensive crops, including apples, grapes, and potatoes, in Washington State. The labor-intensive agriculture industry in Washington State heavily relies on seasonal and part-time workers, and thus has a large potential to substitute capital for labor through mechanization. We found that large employers and those already offering health insurance coverage were 28 percentage points and 48 percentage points more likely to offer employer-sponsored health insurance in the future, respectively, compared to small firms and those not offering health insurance at the time of the survey. Grape growers were 13 percentage points less likely to provide coverage in the future compared to apple growers and other agricultural businesses.

Introduction

The Affordable Care Act (ACA) aims to increase the number of insured individuals through two mandates: the individual mandate and the employer mandate. At the time of its inception and initial implementation, there was significant resistance to the ACA from much of the business community, which argued that it would make workers worse off as businesses adapt to changes in relative factor costs. Some aspects of the structure of the ACA also have the potential to employ adaptation strategies with implications for industry structure. For example, the association between business size and the requirement to provide health benefits to workers may create disincentives to expand from a small firm to a mid-size firm. This potential is likely greater in industries that have experience in hiring varying numbers of workers throughout the year at different work schedules, which certainly describes the agriculture industry including both farms and downstream processing. Also, as opposed to much of manufacturing, there is still significant room to increase mechanization to substitute capital for labor in agricultural production. All else constant, the implication is that farm businesses are in a position to shift any increases in labor costs associated with the ACA to workers in the form of lower wages or reduced employment.

This report describes the adaptation strategies of 186 farm businesses in Washington State to the ACA. Differences across industries in terms of technologies, the nature of work, and levels of skill, to name just a few, motivate limiting the scope by focusing on a particular industry. We focus on labor-intensive agriculture because it has a number of characteristics that make it an interesting “canary in the coalmine” for assessing the effects of the ACA on businesses and workers. For one, many farm workers are seasonal or part-time which results in generally low rates of insured individuals. In the agriculture industry, 52% of workers had health insurance coverage through their own or a spouse’s employer compared to 81%, on an average, in other industries (US Census 2014). However, the take-up rates (the percentage of employees who are eligible for their employer’s health insurance coverage and enroll in the coverage) are similar across industries (BLS 2014). Also, farm work involves a number of discomforts including exposure to heat, chemicals, and generally physically demanding and risky tasks that present potentially significant trade-offs between wages and fringe benefits like health insurance. Another reason to look at agriculture is that it is the dominant industry for employment in many rural parts of the U.S. where limitations to access to health care are the most acute (Ricketts 2000). Lastly, as opposed to much of manufacturing, there is still significant room to increase mechanization and to substitute capital for labor in the vegetable and fruit industries that generate over half of the total value of agricultural commodity production in the U.S. (Calvin and Martin 2010). The potential for policies like the ACA that increase costs of workers to businesses to reduce wages and increase unemployment is an argument against them (Tanner 2014). On the other hand, investing in employees’ health can reap benefits through increased productivity, higher retention rates, and lower absenteeism (Dunn 1985; Gabbard and Perloff 1997).

Our survey aimed to improve understanding of (1) the current provision of employer-based health coverage, (2) how well agricultural operators understand which businesses are subject to the employer mandate of the ACA, and (3) agricultural operators’ perceptions of how the ACA will affect their businesses and how they are likely to respond to its implementation. Before presenting the findings from our survey, we briefly review the existing literature on how farm workers value fringe benefits. Fringe benefit refers to the various ways workers are compensated other than through wages and salaries. Health insurance is one type of fringe benefit.

Page:

...

Copyright 2016 Washington State University

WSU Extension bulletins contain material written and produced for public distribution. Alternate formats of our educational materials are available upon request for persons with disabilities. Please contact Washington State University Extension for more information

Issued by Washington State University Extension and the U.S. Department of Agriculture in furtherance of the Acts of May 8 and June 30, 1914. Extension programs and policies are consistent with federal and state laws and regulations on nondiscrimination regarding race, sex, religion, age, color, creed, and national or ethnic origin; physical, mental, or sensory disability; marital status or sexual orientation; and status as a Vietnam-era or disabled veteran. Evidence of noncompliance may be reported through your local WSU Extension office. Trade names have been used to simplify information; no endorsement is intended.