Question

A recent policy proposal regarding health care sought to require employers to cover an increased share of the cost of health care for their employees. If such an employer mandate were enacted, how might this affect firm hiring decisions?

Select one:

a.
increase its labor force

b.
decrease its labor force

c. increase substitution of other inputs for labor

d. a and c above

Answer 1

if the law requires the employer to cover more amount of cost then what happens is that the cost per worker increases as a result of which a that would be a decrease in the labour force as he will take only less number of workers in order to compensate the increased cost or he would substitute the labour with capital or any other inputs so that his burden would be shifted and decreased and that is the reason why both (a) and (c) are correct which makes

(d) the answer to this question

Because labor force decreases (b) is wrong answer.