US Daily: The Effect of the Biden Vaccine Mandate on Vaccination and Employment (Briggs/Struyven/Bhushan)

Research | Economics | By Jan Hatzius and others
  • Last week, President Biden announced vaccine requirements for 100mn workers, with mandates for all federal employees and most healthcare workers, and a vaccine or testing requirement for all workers at large private firms with 100+ employees.

  • We estimate that the requirements will apply to about 25mn currently unvaccinated individuals, and boost the number of vaccinated individuals by 12mn (or 3.6% of the total population) through March next year, based on surveys and France’s experience with vaccine requirements. We now expect 82% of the total population (and 90% of adults) to be vaccinated with a first dose by mid-2022.

  • We see some downside employment risk in the near term, as 7mn affected workers report that they will definitely not get the vaccine, and vaccine mandates imposed by health care providers earlier this summer caused some workers to leave their jobs. The mandate’s testing option should dampen negative employment effects, however, and many workers that do decide to quit should be able to find jobs at smaller firms not subject to the mandate.

  • The medium-run net employment impact is likely positive since higher full vaccination rates will reduce virus spread, which should boost labor demand in high-contact services and labor force participation among some of the 3mn people who currently aren’t working due to virus-spread concerns.

The Effect of the Biden Vaccine Mandate on Vaccination and Employment

As part of his COVID-19 action plan, President Biden has announced vaccine requirements for three groups of workers, affecting around 100mn workers. First, the Department of Labor’s (DOL) Occupational Safety and Health Administration (OSHA) will require all employers with 100+ employees to ensure their 80mn workforce is fully vaccinated or require unvaccinated workers to test negative before coming to work.[1] Second, the Center for Medicare & Medicaid Services (CMS) will require vaccinations for over 17mn health care workers who participate in Medicare and Medicaid. Third, a new executive order requires vaccinations for all federal executive branch workers and contractors. Federal workers have 75 days to comply with the vaccine mandate, and although the DOL rule has not yet been issued, we expect private businesses will be given a similar time period to comply, suggesting the rule could become binding in late-2021 or early-2022. Although the vaccine mandate will likely be challenged in court, the administration appears to believe it falls within OSHA’s authority, even if enforcement proves challenging. How will these requirements affect the vaccination rate and the labor market?

We first estimate that the requirements will apply to about 25mn currently unvaccinated working individuals by combining self-reported vaccination rates for workers from the Census Household Pulse Survey, actual working-age vaccination rates from the CDC, and employment shares at large private firms, the healthcare sector, and the federal government.

We next estimate the impact of these requirements on vaccination using two approaches. The first approach analyzes France’s COVID immunity pass that requires proof of vaccination, immunity, or a negative test to get into restaurants, bars, hospitals, and public transportation or to work at a public venue. Although France’s immunity pass is mostly tied to spending rather than to work, it imposes similar vaccine/testing requirements to engage in normal economic life. The introduction of the vaccine passport in early July led to a sharp re-acceleration in the pace of first dose vaccinations in France (Exhibit 1, left panel), and a 12pp increase in the first dose vaccination rate relative to Germany (right panel).[2] Given that the US vaccine requirements apply to a smaller share of the population and the higher US pre-mandate vaccination rate and assuming a similar behavioral impact, our first approach implies a roughly 4pp boost from Biden’s vaccine requirements through March next year.

Exhibit 1: France’s Vaccine Requirements Boosted the Share of the Population Vaccinated by Around 12pp

Source: Our World in Data, Goldman Sachs Global Investment Research

The second approach combines data from Census Household Pulse Survey on the shares of working individuals that are unvaccinated and “will probably not get it”, that “will definitely not get it”, or that are unvaccinated for other reasons, with an adjustment for individuals that misreport their vaccination status. Coupled with assumptions on the mandate-driven increase in the vaccination for each of these three groups, this approach implies that the requirements will boost the vaccination rate by just over 3pp by March next year. Averaging both approaches, we estimate that the new requirements will boost the number of vaccinated individuals by 12mn, or 3.6% of the total population.

Incorporating these estimates, the recent somewhat faster-than-expected vaccination pace, and assuming that vaccinations for children ages 5-11 are approved in November, we now expect 82% of the total population (and 90% of adults) to be vaccinated with a first dose by mid-2022 (Exhibit 2).

Exhibit 2: We Have Upgraded our US Vaccination Timeline and Now Expect 82% of the Population to be Vaccinated by Mid-2022

Source: Goldman Sachs Global Investment Research

We see some downside risk to employment in the near-term from the vaccine mandate. According to Census Pulse survey responses, roughly 7mn workers subject to Biden’s mandate state that they will definitely not get the vaccine, and other surveys find that 40-45% of unvaccinated individuals would choose to quit or be fired instead of being vaccinated.[3]

Of course, hypothetical survey responses likely overstate the negative employment effects, since many workers are likely to opt to be tested weekly and some might obtain an exemption, and not all individuals that say they would quit will actually do so. To help gauge the employment impact of vaccine mandates, Exhibit 3 presents data from news reports on health care employer vaccine mandates and calculates the share of workers who were fired, quit, or resigned after the mandate was introduced.

In the median example, 0.6% of healthcare workers left their jobs following employer vaccine mandates, although there was significant variation across experiences. On the low end, only 5 out of 17,000 workers at the Medical University of South Carolina in Charleston were fired for not complying by the end of June, likely because exemptions were given generously to 2,000-3,000 workers. On the high end, 4.6% of workers at Lewis County General Hospital—a rural hospital in upstate New York—resigned in protest to a vaccination mandate in September, leading to a temporary shutdown of the maternity ward.

One major caveat to these case studies is that none of the employers offered a testing option, which should significantly dampen any negative employment effects, provided that employers make tests reasonably convenient. However, these examples do suggest there may be some employment reallocation this fall as vaccine-resisters search for jobs at smaller companies not subject to the mandate. The good news for the labor outlook is that labor demand is at a record high level and job openings have increased the most at small establishments, so many workers that do decide to quit their jobs should be able to find jobs at smaller firms relatively easily.

Exhibit 3: A Median of 0.6% of Healthcare Workers Quit After Vaccine Mandates Were Introduced, Although No Testing Alternatives Were Offered in These Case Studies

Source: Press Reports, data compiled by Goldman Sachs Global Investment Research

In contrast, the mandate’s medium-run employment effects are likely positive for two reasons. First, a higher share of vaccinated individuals should help lower virus spread—and therefore lower the risk of a virus-drag on job growth like we saw in August—and boost labor demand in high-contact services that have been slow to recover.

Second, concerns regarding health risk have been a significant contributor to the lackluster recovery in labor force participation this far, and increased vaccination will likely encourage labor force entry. As shown in Exhibit 4, over 3mn respondents to the Census Household Pulse Survey currently indicate that concerns about getting or spreading COVID-19 are their main reason for not working, and the decline in these concerns this past spring tracked closely with cumulative vaccinations (inverted). We therefore anticipate that an increase in vaccination and almost full vaccination at workplaces should encourage many of the 5mn workers that have left the labor force since the start of the pandemic to return.

Exhibit 4: Increased Vaccination Is Associated With a Decline in the Number of Workers Not Working Due to Concerns About Getting or Spreading COVID

Source: Census Bureau, Goldman Sachs Global Investment Research

There is still a significant amount of uncertainty regarding the mandate’s implementation—including when and how strictly it will be enforced, how many employers will provide convenient testing options, and how difficult it will be for workers to obtain exemptions—that will determine its impact on employment. We are therefore not adjusting our employment forecast, but we see some downside risk to employment at end-2021 and upside risk by end-2022 as a result of the mandate.

Joseph Briggs

Daan Struyven

Sid Bhushan

1 ^ OSHA will issue an Emergency Temporary Standard (ETS) to implement this requirement.
2 ^ We assume that France’s vaccination pace would have followed the German pace in the absence of the requirements.
3 ^ 42% of Washington Post/ABC survey respondents, 44% of Qualtrics survey respondents, and 45% of San Diego police officers report they would quit rather than get vaccinated if their employer imposed a vaccine mandate.

Investors should consider this report as only a single factor in making their investment decision. For Reg AC certification and other important disclosures, see the Disclosure Appendix, or go to www.gs.com/research/hedge.html.

Disclosure Appendix

Reg AC

We, Jan Hatzius, Alec Phillips, David Mericle, Spencer Hill, CFA, Joseph Briggs, Ronnie Walker, Daan Struyven and Sid Bhushan, hereby certify that all of the views expressed in this report accurately reflect our personal views, which have not been influenced by considerations of the firm's business or client relationships.

Unless otherwise stated, the individuals listed on the cover page of this report are analysts in Goldman Sachs' Global Investment Research division.

Disclosures

Regulatory disclosures

Disclosures required by United States laws and regulations

See company-specific regulatory disclosures above for any of the following disclosures required as to companies referred to in this report: manager or co-manager in a pending transaction; 1% or other ownership; compensation for certain services; types of client relationships; managed/co-managed public offerings in prior periods; directorships; for equity securities, market making and/or specialist role. Goldman Sachs trades or may trade as a principal in debt securities (or in related derivatives) of issuers discussed in this report.

The following are additional required disclosures: Ownership and material conflicts of interest: Goldman Sachs policy prohibits its analysts, professionals reporting to analysts and members of their households from owning securities of any company in the analyst's area of coverage.  Analyst compensation:  Analysts are paid in part based on the profitability of Goldman Sachs, which includes investment banking revenues.  Analyst as officer or director: Goldman Sachs policy generally prohibits its analysts, persons reporting to analysts or members of their households from serving as an officer, director or advisor of any company in the analyst's area of coverage.  Non-U.S. Analysts:  Non-U.S. analysts may not be associated persons of Goldman Sachs & Co. LLC and therefore may not be subject to FINRA Rule 2241 or FINRA Rule 2242 restrictions on communications with subject company, public appearances and trading securities held by the analysts. 

Additional disclosures required under the laws and regulations of jurisdictions other than the United States

The following disclosures are those required by the jurisdiction indicated, except to the extent already made above pursuant to United States laws and regulations. Australia: Goldman Sachs Australia Pty Ltd and its affiliates are not authorised deposit-taking institutions (as that term is defined in the Banking Act 1959 (Cth)) in Australia and do not provide banking services, nor carry on a banking business, in Australia. This research, and any access to it, is intended only for "wholesale clients" within the meaning of the Australian Corporations Act, unless otherwise agreed by Goldman Sachs. In producing research reports, members of the Global Investment Research Division of Goldman Sachs Australia may attend site visits and other meetings hosted by the companies and other entities which are the subject of its research reports. In some instances the costs of such site visits or meetings may be met in part or in whole by the issuers concerned if Goldman Sachs Australia considers it is appropriate and reasonable in the specific circumstances relating to the site visit or meeting. To the extent that the contents of this document contains any financial product advice, it is general advice only and has been prepared by Goldman Sachs without taking into account a client's objectives, financial situation or needs. A client should, before acting on any such advice, consider the appropriateness of the advice having regard to the client's own objectives, financial situation and needs. A copy of certain Goldman Sachs Australia and New Zealand disclosure of interests and a copy of Goldman Sachs’ Australian Sell-Side Research Independence Policy Statement are available at: https://www.goldmansachs.com/disclosures/australia-new-zealand/index.htmlBrazil: Disclosure information in relation to CVM Resolution n. 20 is available at https://www.gs.com/worldwide/brazil/area/gir/index.html. Where applicable, the Brazil-registered analyst primarily responsible for the content of this research report, as defined in Article 20 of CVM Resolution n. 20, is the first author named at the beginning of this report, unless indicated otherwise at the end of the text.  Canada: Goldman Sachs Canada Inc. is an affiliate of The Goldman Sachs Group Inc. and therefore is included in the company specific disclosures relating to Goldman Sachs (as defined above). Goldman Sachs Canada Inc. has approved of, and agreed to take responsibility for, this research report in Canada if and to the extent that Goldman Sachs Canada Inc. disseminates this research report to its clients.  Hong Kong: Further information on the securities of covered companies referred to in this research may be obtained on request from Goldman Sachs (Asia) L.L.C.  India: Further information on the subject company or companies referred to in this research may be obtained from Goldman Sachs (India) Securities Private Limited, Research Analyst - SEBI Registration Number INH000001493, 951-A, Rational House, Appasaheb Marathe Marg, Prabhadevi, Mumbai 400 025, India, Corporate Identity Number U74140MH2006FTC160634, Phone +91 22 6616 9000, Fax +91 22 6616 9001. Goldman Sachs may beneficially own 1% or more of the securities (as such term is defined in clause 2 (h) the Indian Securities Contracts (Regulation) Act, 1956) of the subject company or companies referred to in this research report.  Japan: See below.  Korea: This research, and any access to it, is intended only for "professional investors" within the meaning of the Financial Services and Capital Markets Act, unless otherwise agreed by Goldman Sachs. Further information on the subject company or companies referred to in this research may be obtained from Goldman Sachs (Asia) L.L.C., Seoul Branch.  New Zealand: Goldman Sachs New Zealand Limited and its affiliates are neither "registered banks" nor "deposit takers" (as defined in the Reserve Bank of New Zealand Act 1989) in New Zealand. This research, and any access to it, is intended for "wholesale clients" (as defined in the Financial Advisers Act 2008) unless otherwise agreed by Goldman Sachs. A copy of certain Goldman Sachs Australia and New Zealand disclosure of interests is available at: https://www.goldmansachs.com/disclosures/australia-new-zealand/index.htmlRussia: Research reports distributed in the Russian Federation are not advertising as defined in the Russian legislation, but are information and analysis not having product promotion as their main purpose and do not provide appraisal within the meaning of the Russian legislation on appraisal activity. Research reports do not constitute a personalized investment recommendation as defined in Russian laws and regulations, are not addressed to a specific client, and are prepared without analyzing the financial circumstances, investment profiles or risk profiles of clients. Goldman Sachs assumes no responsibility for any investment decisions that may be taken by a client or any other person based on this research report.  Singapore: Goldman Sachs (Singapore) Pte. (Company Number: 198602165W), which is regulated by the Monetary Authority of Singapore, accepts legal responsibility for this research, and should be contacted with respect to any matters arising from, or in connection with, this research.  Taiwan: This material is for reference only and must not be reprinted without permission. Investors should carefully consider their own investment risk. Investment results are the responsibility of the individual investor.  United Kingdom: Persons who would be categorized as retail clients in the United Kingdom, as such term is defined in the rules of the Financial Conduct Authority, should read this research in conjunction with prior Goldman Sachs research on the covered companies referred to herein and should refer to the risk warnings that have been sent to them by Goldman Sachs International. A copy of these risks warnings, and a glossary of certain financial terms used in this report, are available from Goldman Sachs International on request. 

European Union and United Kingdom: Disclosure information in relation to Article 6 (2) of the European Commission Delegated Regulation (EU) (2016/958) supplementing Regulation (EU) No 596/2014 of the European Parliament and of the Council (including as that Delegated Regulation is implemented into United Kingdom domestic law and regulation following the United Kingdom’s departure from the European Union and the European Economic Area) with regard to regulatory technical standards for the technical arrangements for objective presentation of investment recommendations or other information recommending or suggesting an investment strategy and for disclosure of particular interests or indications of conflicts of interest is available at https://www.gs.com/disclosures/europeanpolicy.html which states the European Policy for Managing Conflicts of Interest in Connection with Investment Research. 

Japan: Goldman Sachs Japan Co., Ltd. is a Financial Instrument Dealer registered with the Kanto Financial Bureau under registration number Kinsho 69, and a member of Japan Securities Dealers Association, Financial Futures Association of Japan and Type II Financial Instruments Firms Association. Sales and purchase of equities are subject to commission pre-determined with clients plus consumption tax. See company-specific disclosures as to any applicable disclosures required by Japanese stock exchanges, the Japanese Securities Dealers Association or the Japanese Securities Finance Company. 

Global product; distributing entities

The Global Investment Research Division of Goldman Sachs produces and distributes research products for clients of Goldman Sachs on a global basis. Analysts based in Goldman Sachs offices around the world produce research on industries and companies, and research on macroeconomics, currencies, commodities and portfolio strategy. This research is disseminated in Australia by Goldman Sachs Australia Pty Ltd (ABN 21 006 797 897); in Brazil by Goldman Sachs do Brasil Corretora de Títulos e Valores Mobiliários S.A.; Public Communication Channel Goldman Sachs Brazil: 0800 727 5764 and / or contatogoldmanbrasil@gs.com. Available Weekdays (except holidays), from 9am to 6pm. Canal de Comunicação com o Público Goldman Sachs Brasil: 0800 727 5764 e/ou contatogoldmanbrasil@gs.com. Horário de funcionamento: segunda-feira à sexta-feira (exceto feriados), das 9h às 18h; in Canada by either Goldman Sachs Canada Inc. or Goldman Sachs & Co. LLC; in Hong Kong by Goldman Sachs (Asia) L.L.C.; in India by Goldman Sachs (India) Securities Private Ltd.; in Japan by Goldman Sachs Japan Co., Ltd.; in the Republic of Korea by Goldman Sachs (Asia) L.L.C., Seoul Branch; in New Zealand by Goldman Sachs New Zealand Limited; in Russia by OOO Goldman Sachs; in Singapore by Goldman Sachs (Singapore) Pte. (Company Number: 198602165W); and in the United States of America by Goldman Sachs & Co. LLC. Goldman Sachs International has approved this research in connection with its distribution in the United Kingdom.

Effective from the date of the United Kingdom’s departure from the European Union and the European Economic Area (“Brexit Day”) the following information with respect to distributing entities will apply:

Goldman Sachs International (“GSI”), authorised by the Prudential Regulation Authority (“PRA”) and regulated by the Financial Conduct Authority (“FCA”) and the PRA, has approved this research in connection with its distribution in the United Kingdom.

European Economic Area: GSI, authorised by the PRA and regulated by the FCA and the PRA, disseminates research in the following jurisdictions within the European Economic Area: the Grand Duchy of Luxembourg, Italy, the Kingdom of Belgium, the Kingdom of Denmark, the Kingdom of Norway, the Republic of Finland, Portugal, the Republic of Cyprus and the Republic of Ireland; GS -Succursale de Paris (Paris branch) which, from Brexit Day, will be authorised by the French Autorité de contrôle prudentiel et de resolution (“ACPR”) and regulated by the Autorité de contrôle prudentiel et de resolution and the Autorité des marches financiers (“AMF”) disseminates research in France; GSI - Sucursal en España (Madrid branch) authorized in Spain by the Comisión Nacional del Mercado de Valores disseminates research in the Kingdom of Spain; GSI - Sweden Bankfilial (Stockholm branch) is authorized by the SFSA as a “third country branch” in accordance with Chapter 4, Section 4 of the Swedish Securities and Market Act (Sw. lag (2007:528) om värdepappersmarknaden) disseminates research in the Kingdom of Sweden; Goldman Sachs Bank Europe SE (“GSBE”) is a credit institution incorporated in Germany and, within the Single Supervisory Mechanism, subject to direct prudential supervision by the European Central Bank and in other respects supervised by German Federal Financial Supervisory Authority (Bundesanstalt für Finanzdienstleistungsaufsicht, BaFin) and Deutsche Bundesbank and disseminates research in the Federal Republic of Germany and those jurisdictions within the European Economic Area where GSI is not authorised to disseminate research and additionally, GSBE, Copenhagen Branch filial af GSBE, Tyskland, supervised by the Danish Financial Authority disseminates research in the Kingdom of Denmark; GSBE - Sucursal en España (Madrid branch) subject (to a limited extent) to local supervision by the Bank of Spain disseminates research in the Kingdom of Spain; GSBE - Succursale Italia (Milan branch) to the relevant applicable extent, subject to local supervision by the Bank of Italy (Banca d’Italia) and the Italian Companies and Exchange Commission (Commissione Nazionale per le Società e la Borsa “Consob”) disseminates research in Italy; GSBE - Succursale de Paris (Paris branch), supervised by the AMF and by the ACPR disseminates research in France; and GSBE - Sweden Bankfilial (Stockholm branch), to a limited extent, subject to local supervision by the Swedish Financial Supervisory Authority (Finansinpektionen) disseminates research in the Kingdom of Sweden.

General disclosures

This research is for our clients only. Other than disclosures relating to Goldman Sachs, this research is based on current public information that we consider reliable, but we do not represent it is accurate or complete, and it should not be relied on as such. The information, opinions, estimates and forecasts contained herein are as of the date hereof and are subject to change without prior notification. We seek to update our research as appropriate, but various regulations may prevent us from doing so. Other than certain industry reports published on a periodic basis, the large majority of reports are published at irregular intervals as appropriate in the analyst's judgment.

Goldman Sachs conducts a global full-service, integrated investment banking, investment management, and brokerage business. We have investment banking and other business relationships with a substantial percentage of the companies covered by our Global Investment Research Division. Goldman Sachs & Co. LLC, the United States broker dealer, is a member of SIPC (https://www.sipc.org).

Our salespeople, traders, and other professionals may provide oral or written market commentary or trading strategies to our clients and principal trading desks that reflect opinions that are contrary to the opinions expressed in this research. Our asset management area, principal trading desks and investing businesses may make investment decisions that are inconsistent with the recommendations or views expressed in this research.

We and our affiliates, officers, directors, and employees, will from time to time have long or short positions in, act as principal in, and buy or sell, the securities or derivatives, if any, referred to in this research, unless otherwise prohibited by regulation or Goldman Sachs policy.

The views attributed to third party presenters at Goldman Sachs arranged conferences, including individuals from other parts of Goldman Sachs, do not necessarily reflect those of Global Investment Research and are not an official view of Goldman Sachs.

Any third party referenced herein, including any salespeople, traders and other professionals or members of their household, may have positions in the products mentioned that are inconsistent with the views expressed by analysts named in this report.

This research is focused on investment themes across markets, industries and sectors. It does not attempt to distinguish between the prospects or performance of, or provide analysis of, individual companies within any industry or sector we describe.

Any trading recommendation in this research relating to an equity or credit security or securities within an industry or sector is reflective of the investment theme being discussed and is not a recommendation of any such security in isolation.

This research is not an offer to sell or the solicitation of an offer to buy any security in any jurisdiction where such an offer or solicitation would be illegal. It does not constitute a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual clients. Clients should consider whether any advice or recommendation in this research is suitable for their particular circumstances and, if appropriate, seek professional advice, including tax advice. The price and value of investments referred to in this research and the income from them may fluctuate. Past performance is not a guide to future performance, future returns are not guaranteed, and a loss of original capital may occur. Fluctuations in exchange rates could have adverse effects on the value or price of, or income derived from, certain investments.

Certain transactions, including those involving futures, options, and other derivatives, give rise to substantial risk and are not suitable for all investors. Investors should review current options and futures disclosure documents which are available from Goldman Sachs sales representatives or at https://www.theocc.com/about/publications/character-risks.jsp and https://www.fiadocumentation.org/fia/regulatory-disclosures_1/fia-uniform-futures-and-options-on-futures-risk-disclosures-booklet-pdf-version-2018. Transaction costs may be significant in option strategies calling for multiple purchase and sales of options such as spreads. Supporting documentation will be supplied upon request.

Differing Levels of Service provided by Global Investment Research: The level and types of services provided to you by the Global Investment Research division of GS may vary as compared to that provided to internal and other external clients of GS, depending on various factors including your individual preferences as to the frequency and manner of receiving communication, your risk profile and investment focus and perspective (e.g., marketwide, sector specific, long term, short term), the size and scope of your overall client relationship with GS, and legal and regulatory constraints. As an example, certain clients may request to receive notifications when research on specific securities is published, and certain clients may request that specific data underlying analysts’ fundamental analysis available on our internal client websites be delivered to them electronically through data feeds or otherwise. No change to an analyst’s fundamental research views (e.g., ratings, price targets, or material changes to earnings estimates for equity securities), will be communicated to any client prior to inclusion of such information in a research report broadly disseminated through electronic publication to our internal client websites or through other means, as necessary, to all clients who are entitled to receive such reports.

All research reports are disseminated and available to all clients simultaneously through electronic publication to our internal client websites. Not all research content is redistributed to our clients or available to third-party aggregators, nor is Goldman Sachs responsible for the redistribution of our research by third party aggregators. For research, models or other data related to one or more securities, markets or asset classes (including related services) that may be available to you, please contact your GS representative or go to https://research.gs.com.

Disclosure information is also available at https://www.gs.com/research/hedge.html or from Research Compliance, 200 West Street, New York, NY 10282.

© 2021 Goldman Sachs.

No part of this material may be (i) copied, photocopied or duplicated in any form by any means or (ii) redistributed without the prior written consent of The Goldman Sachs Group, Inc.