Hr 599 - Government Mandated Benefits

GOVERNMENT MANDATED BENEFITS

HR 599

Table of Contents

Introduction 3

Article Summary 3

Analysis 5

Conclusion 8

References 9

Introduction

In this article, we will be summarizing and analyzing an article on Government Mandated benefits found at the Amherst College website titled “Some Simple Economics of Mandated Benefits”. The federal and state governments in the United States have mandated certain benefits, mostly related to health insurance. The article analyses the economic impact of these benefits.

Article Summary

There are certain benefits which have been mandated by the government which an employer must provide to its employees. Most companies today provide employee benefits to attract them to their organization. Some of these benefits have been mandated to ensure that an employee’s future and wellbeing is secured even though the employer does not provide any other benefits to him/her. Employers mostly and in some cases employees need to pay for these benefits. This article analyses the reasons behind the choices the government has made. It also takes a look at the efficiency of these programs. In the US, social responsibility of the government is fulfilled by the help of mandated benefits which in turn are financed by taxes. Economists generally have not paid much attention to mandated benefits considering them to be simple tax and expenditure methods. The paper looks at some of the reasons to provide mandated benefits.

The article talks about efficiency of mandated benefits. It is argued that companies could provide the employee benefits in terms of money or insurance as negotiated upon by both parties. This type of negotiation will result in a mutually amicable and efficient solution for both parties. But there are problems with this model. Individuals generally rate certain benefits higher than other and might underestimate the importance of others and probabilities of some calamities which might cause problem for him or his family. Other than individual irrationality, benefits are sometimes mandated because they intend to serve a greater social purpose which neither party can see. An example would medical insurance. The society in general is concerned more about the arresting the spread of contagious diseases than an individual. Medical benefits help that cause. In some cases, if a benefit is not mandated, employers do not try to provide it since they more often than not face losses. In such a case, it would be optimal for the government to intervene