Republicans like to warn that Obamacare is pushing droves of people into part-time work.
House Speaker John Boehner has said “millions” of Americans can only find part-time work because of the law. Majority Leader Eric Cantor says America’s economy is now a “part-time job economy.” Sen. Ted Cruz used the talking point over and over again during his long Senate floor speech about defunding Obamacare.
This talking point is a lie.
It’s not clear Obamacare is yet having any effect on work hours. And if there is an effect, it looks really small — perhaps on the order of 100,000 workers having their hours cut, or one out of every 1,500 Americans in the labour force.
But there is a conversation we should be having about how Obamacare affects the labour market, especially the “employer responsibility provision” that will come into effect in 2015. This provision will charge a $US2,000 per-worker penalty to certain firms that do not provide health coverage to full-time employees. By the time the law is fully implemented, this probably will have a small but measurable effect of boosting involuntary part-time employment, perhaps by half a million workers.
There is room for policy improvement here.
The fraction of workers whose jobs could be affected by this provision is real, but small. The penalty only applies to firms with 50 employees or more. And it only penalizes companies that don’t already offer health coverage to full time workers, which nearly all large firms do. According to the Kaiser Family Foundation, in 2013, 91% of firms with 50 to 199 employees and 99% of firms with 200 or more employees offer coverage.
So to be at risk of having your hours cut due to this provision, you have to be one of the few workers at a large firm that doesn’t offer coverage. You also have to already be working (and want to work) more than 30 hours a week, and you probably have to have a low wage. For the rare high-wage worker at a firm not providing health insurance, a $US2,000 penalty is likely not enough to induce the employer to cut hours.
Jed Graham at Investors’ Business Daily has been the leading numbers-based proponent of the case that Obamacare is driving part time work. For example, he’s found that average hours worked are declining at general merchandise retailers and bakeries (two sectors with a lot of full-time low-wage workers) even as they’re rising across the whole economy.
There’s a problem with looking at narrow slices like this: Employment data comes from imperfect surveys, and if you look at enough sub-samples, you’re likely to find some that confirm your hypothesis simply by chance. For example, market observers have been fretting for months about an economy-wide rise in part-time work that now appears to have been simply a blip in the Labour Department’s household employment survey.
But even if Graham’s numbers are representative of real economic trends, the effects he’s finding are small. He notes that, since a year ago, 119,000 more workers are employed 25-29 hours a week and 142,000 fewer are employed 30-34 hours a week. (The Affordable Care Act defines a full time worker, for purposes of the penalty, as someone working at least 30 hours.) If that entire shift is real and attributable to the ACA, it implies effects on the workweeks of somewhere between 1 in 1,000 and 1 in 1,500 American workers.
Employers still have 15 months left before the penalties come into effect, so we may see bigger effects in 2014 and 2015. We already have a test case for this: Hawaii has had a version of the employer penalty since the 1970s, and economists at the Federal Reserve Bank of San Francisco found it led to about a 1.4% rise in part-time employment compared to states without the policy.
If Hawaii’s effects went national, we’d expect the employer mandate to eventually push about 400,000 Americans from full-time work to part-time work.
That would be real problem, though not a wholesale reordering of the economy and not a reason to decry effects on “millions” of Americans. And the problem needs to be weighed against the policy benefits from the ACA: tens of millions of Americans getting health insurance they previously couldn’t access or afford.
The irony of this discussion is that some of the biggest beneficiaries from the ACA are the same low-wage, uninsured workers whose interests Republicans purport to defend when they complain about the law’s effects on work hours.
Under Obamacare, these workers get real benefits. Some will start getting health insurance through work because the employer mandate provision induces their employers to start offering coverage. Others work for firms that will pay the penalty instead of offering coverage — those workers will get new access to heavily subsidized insurance through Obamacare’s exchanges (at least, once HealthCare.gov starts working properly.)
Those subsidies will often be quite large. A single parent with two dependent children working full time at $US15 per hour with no health insurance will be able to get a silver-level exchange plan for just $US1,250 per year under Obamacare. Even uninsured employees whose hours are modestly cut (say from 32 hours a week to 28) may come out ahead because of Obamacare’s insurance subsidies.
What do Republicans propose to do to help these workers get health coverage once they have repealed Obamacare? Let them save money they don’t have in tax-free Health Savings Accounts?
All that said, repealing the employer mandate penalty would improve Obamacare. In part, that’s because what small inducements for part-time employment the law does create would go away. And partly that’s because the cost the mandate imposes on employers is likely to be passed through to workers, over time, as wage reductions.
But most importantly, eliminating the employer mandate would make the law more progressive. As I noted above, the exchange subsidies available to low-wage workers are often very large, but they can’t access them if they’re getting insurance through work.
Trader Joe’s is actually making a lot of its part-time workers better off by ending their health coverage and giving them $US500 instead. In many cases, these employees’ post-subsidy premiums in the Obamacare exchanges will be less than the required employee contribution to the old Trader Joe’s plan.
Absent the employer mandate, many firms like Trader Joe’s in industries that rely on low-wage, low-skill labour would probably make the same decision to end coverage for their full-time workers, sending them to the exchanges. Instead of creating a small new problem in the labour market, Obamacare would relieve employers of one of the main costs of hiring and actually encourage more job creation. And since, in the long run, the cost of employee benefits is borne by workers, the government taking over responsibility for health coverage should lead to a rise in the wages of low-skill workers who have been hit especially hard by recent years’ economic dysfunction.
The main drawback of eliminating the employer mandate would be fiscal: The government would lose out on about $US110 billion in revenue over 10 years, and more people would draw expensive exchange subsidies. That cost would have to be financed with debt in the short term and taxes in the long term. But the ultimate tax source used to cover that gap could be both more progressive and less economically damaging than the employer mandate itself.
A conversation about improving Obamacare — perhaps someday, Republicans will be interested in having that conversation, instead of undermining and demagoguing the law at every turn — should include repealing the employer mandate so the law can have a positive effect on labour markets instead of a modest negative one. But even if the mandate isn’t repealed, America won’t turn into a “part-time work economy.”
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