From the analysis fo San Francisco's EBO (in place since 1997) done by IGLSS: The experience of many large employers suggests that adding provisions for both same-sex and opposite-sex domestic partners results in a 0.5% to 3% increase in health care plan enrollment. Second, according to the U.S. Bureau of Labor Statistics, the average employer spends roughly 6% of labor costs on health care benefits for employees and family members. So, if health care coverage constitutes only 6% of a typical employers production costs, and those costs increase by 0.5% to 2.5%, the resulting change in labor cost should range between 0.03% and 0.18%. Further, if labor costs constitute half of the total cost of providing a product or service, for instance, then the company’s total cost of production would only rise 0.015% to 0.09%. However, this report maintains a more conservative estimate of a range of 0.03% to 0.18% in increased costs as the likely result of an equal benefits ordinance.
Therefore, using the experience of other employers suggests that firms would experience increased labor costs of 0.03% to 0.18%, and other studies suggest that approximately two-thirds, or 0.02% to 0.12% of those costs, would actually be passed through to the City in the form of higher prices. To put this in perspective, a company with a $10,000 contract with the City might charge $10,002 to $10,012 for the same contract after offering domestic partner benefits to its City-contract employees as a way of becoming compliant with the Equal Benefits Ordinance.
Lessons for Implementation: This potential source of higher prices for cities should only result in extremely small increases. This analysis suggests that a range of 0.02% to 0.12% is reasonable to expect. Of course, companies might use a new law as an opportunity to increase prices much more than that. Such behavior, if not justified by company-specific employment and cost data, would suggest unwarranted price inflation. Cities can protect against dishonest pricing of goods (i.e. excessive price increases represented as being related to the provision of domestic partner benefits) by educating those city employees who contract on behalf of the city. If those employees understand what kind of price increases they should expect from honest companies, and are empowered to require contractors to justify excessive higher prices with specific cost information, disproportionate pricing can be avoided.
re: The Equal Benefits Ordinance
Sharon,
From the analysis fo San Francisco's EBO (in place since 1997) done by IGLSS: The experience of many large employers suggests that adding provisions for both same-sex and opposite-sex domestic partners results in a 0.5% to 3% increase in health care plan enrollment. Second, according to the U.S. Bureau of Labor Statistics, the average employer spends roughly 6% of labor costs on health care benefits for employees and family members. So, if health care coverage constitutes only 6% of a typical employers production costs, and those costs increase by 0.5% to 2.5%, the resulting change in labor cost should range between 0.03% and 0.18%. Further, if labor costs constitute half of the total cost of providing a product or service, for instance, then the company’s total cost of production would only rise 0.015% to 0.09%. However, this report maintains a more conservative estimate of a range of 0.03% to 0.18% in increased costs as the likely result of an equal benefits ordinance.
Therefore, using the experience of other employers suggests that firms would experience increased labor costs of 0.03% to 0.18%, and other studies suggest that approximately two-thirds, or 0.02% to 0.12% of those costs, would actually be passed through to the City in the form of higher prices. To put this in perspective, a company with a $10,000 contract with the City might charge $10,002 to $10,012 for the same contract after offering domestic partner benefits to its City-contract employees as a way of becoming compliant with the Equal Benefits Ordinance.
Lessons for Implementation: This potential source of higher prices for cities should only result in extremely small increases. This analysis suggests that a range of 0.02% to 0.12% is reasonable to expect. Of course, companies might use a new law as an opportunity to increase prices much more than that. Such behavior, if not justified by company-specific employment and cost data, would suggest unwarranted price inflation. Cities can protect against dishonest pricing of goods (i.e. excessive price increases represented as being related to the provision of domestic partner benefits) by educating those city employees who contract on behalf of the city. If those employees understand what kind of price increases they should expect from honest companies, and are empowered to require contractors to justify excessive higher prices with specific cost information, disproportionate pricing can be avoided.
What are your thoughts?