Health Insurance and the Labor Market
Introduction
Health insurance is an insurance cover that is meant to take care of and cover a person’s cost of medical care. The labor market is the supply and demand for labor whereby employees give the supply and the employers give the demand. Labor markets operate through the interaction of employers and employees. In the labor market, the ones employing staff are the buyers and those been employed are the sellers.
Adverse selection refers to any situation whereby one party in the contract holds information pertinent to the contract that the correlating party does not have. This asymmetrical information causes the party that does not have the pertinent information to make decisions that cause it to have adverse effects. (Siegelman 2004). Asymmetric information is perceived as a hindering factor for the effective functioning of the insurance markets. Community rating is the way of putting restrictions on the capability of insures to differ their premiums by the riskiness of their insurance. In this system, an insurer is supposed to charge an equal fee to all the individuals in a given community despite the risks standards such as age or gender among others.
An increased wage in the labor market leads to a decline in the amount of labor whereas a decreased wage leads to an incline in the amount of labor that is demanded. An increased price for labor leads to an inclined amount in the supply of labor while a lower price leads to a low amount of supply.
Increased healthcare costs impact employment on the employer's side whereby employer-paid premiums are a cost of the business just like wages. (Cutler & Sood 2010). Employers employ and pay workers depending on their productivity and in many cases, a healthy employee will be more productive than an unhealthy one. An employee’s health status will influence their decisions to seek full-time employment, part-time, or not be employed at all. All these affect the employee’s compensation which is mainly in the form of health insurance. When the growth of health insurance premiums are reduced, employers can employ more workers and when the cost reduces, there is an impact on higher wages and salaries
Conclusion
The health insurance and the labor market have a great impact in helping to make decisions regarding the hiring of employees and determining wages and salaries. For healthcare workers, the increase in insurance premiums leads to a decrease in wages and vice versa. It influences a worker's decision to be employed fulltime, part-time, or not be employed.
References
Cutler S. & Sood N (2010) New Jobs through Better Health Care. Retrieved from
http://web.archive.org/web/20140420133310/http://www.americanprogress.org/issues/20
10/01/pdf/health_care_jobs.pdf
Siegelman P. (2004) Adverse Selection in Insurance Markets: An Exaggerated Threat. Retrieved
from https://digitalcommons.law.yale.edu/cgi/viewcontent.cgiarticle=4904&context=ylj
