Washington State Legislative Proposal:

Require all firms with 5000 or more employees to provide healthcare coverage for their employees.

What are the implications?

What is the marginal cost of adding the 5000^th unit of labor?

Assumption:

Annual healthcare cost is $2400 per employee

5000 employees X $2400 = $12,000,000

The marginal cost of hiring the 5000^th employee is $12,000,000!

What is the dollar contribution of the 5000^th employee (expected marginal benefit)?