Allison Schrager

Biden's Vaccine Mandate Is More Bad News for the Labor Market

Good policy can be bad economics. The US would be better off if as many adults as possible are vaccinated. But while President Joe Biden's mandate will lessen risk for Americans, it won't eliminate it, and the benefits must be weighed against the costs that will be borne by the most economically vulnerable.

If every possible adult were vaccinated, living with the virus would be much more tolerable. More vaccinated people means less spread, death and strain on our health care system. Any policy that makes vaccination the path of least resistance is a step in the right direction.

And yet the libertarianish economist in me feels ambivalent because of the trade-offs posed by any regulation on businesses. Biden has commanded that all companies with more than 100 employees either require vaccination or regularly test unvaccinated workers. There are costs that come with that mandate, and they will be borne by private sector employers and the vaccine hold-outs, who tend to be less educated and lower earners.

It will be expensive for businesses to ensure everyone is vaccinated or to set up a testing system. Right now, about 70% of Americans have had at least one shot; so most employees are already conforming. But what, exactly, will constitute full compliance? What about boosters? Given the mixed messaging around how effective and necessary they are, many people may be reluctant to get a third shot, and then employers could be overwhelmed with testing and accommodating non-compliant employees.

Workers have never had more power in the labor market: if someone quits rather than get a vaccine or needs to be fired, it will be very expensive and difficult to replace them. This puts an outsized burden on companies, especially ones on the smaller side, who have fewer than 500 employees. There are already lawsuits cropping up against employers, such as the one brought by George Mason professor, Todd Zywicki, who already has immunity after having had the virus. More inevitable lawsuits will pose more costs to employers and the economy.

I also wonder how effective it will be. Vaccine hold-outs have their reasons. Some are more reasonable than others, but few people respond well to coercion. Many hold-outs are distrustful of the government or health system, so government force leveraged through employers won’t improve that. And if one result is that less educated people leave the labor force, those Americans may bear the costs of that decision for years to come.
Low earners who face spells of unemployment often end up with permanently lower wages, and even when there is no government-mandated hiring constraint, it can take them months or years to find another job. So the mandate may prevent them from working indefinitely, which is not only bad for this group but will also worsen labor shortages.

A big part of the problem is that vaccines became politicized, and this mandate makes that worse, too. It's just one more thing to polarize the country. Some governors are already resisting, which makes the vaccine an even bigger political statement while creating confusion about whether the mandate will be enforced.

Feeling torn is the most natural response to the mandate. We need more carrots and sticks to get shots into arms. But even enthusiasts of the mandate may be disappointed. A pandemic means one person’s risk choice impacts others, and many people responded to the new uncertainty in their lives by harshly judging other people’s choices. First it was masking or social gathering, and now their ire is directed toward the unvaccinated.

That's a natural response when you feel out of control. But even if everyone lived cautiously and got vaccinated, the virus would still be with us. Variants will come from abroad and breakthrough infections are inevitable. Nothing, not even full vaccination via a mandate, will make this risk go away entirely. It's not clear that the costs will be worth the benefit.