Mandated benefits affect labor market outcomes in three distinct ways. The first mandated theory is when the workers valuation for the benefit exceeds the cost of the mandate. If the value of the benefit is greater than the cost, employment increases and wages drop by more than the cost of the benefit. The second mandated theory is when workers do not value the mandated benefit at the rate that it costs to provide this benefit, meaning workers attach no value whatsoever to this particular benefit. Resulting in a decline in employment and a drop in wages. Illustrating this situation on a graph results in a downward shift in the supply and an even greater downward shift in the demand curve. This new equilibrium where workers attach no value to the mandated benefit is a reflection that would happen if the government instead endorsed a payroll tax. The third mandated theory is when the cost of the mandate for empl...
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...plicit assumption that the benefit is not tied to employment. However, benefits provided through taxes could possibly be tied to employment and that would alter the supply curve. If the benefit is tied to employment, as it is in this case, it does not matter if it is funded through a mandated benefit or payroll tax. Workers will value the benefit provided by either one, equally.
According to the Affordable Care Act employers of fifty or more workers are mandated to offer health insurance to their workforce as well as individuals in the workforce or not are mandated to be covered by a health insurance plan unless they are experiencing financial hardships. Due to these programs firms now have an incentive to hire less than fifty workers and correspondingly more individuals will find that working to many hours may put them above the qualifying poverty threshold
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