The Affordable Care Act, aka Obamacare, aims to get more Americans on health insurance.
You see, under the employer mandate of Obamacare, businesses employing 50 or more workers will be forced to offer health insurance or pay a penalty of $US2,000 per full-time worker (i.e., those working over 30 hours per week).
The simple way to get around this penalty is obviously to reduce each employee’s hours, but offset that by hiring more workers.
“Our analysis of a similar program in Massachusetts suggested that this law could slow job growth in the United States,” wrote UBS’s Drew Matus in a June research note. “Given the impact on Massachusetts, we could see a reduction in job growth of almost 500,000 during the first few years of the act’s implementation. Alternatively, we could see more hiring driven by part-timers not eligible for health insurance (which could increase hiring) with a commensurate decline in the average workweek.”
Here’s a recent anecdote from The Economist:
BEFORE the recession, Richard Clark’s cleaning company in Florida had 200 employees, about half of them working full time. These days it has about 150, with 80% part-time. The downturn explains some of this. But Mr Clark also blames Barack Obama’s health reform…
Mr Clark says he is “very careful with the threshold”. To keep his full-time workforce below the magic number of 50, he is relying more on part-timers. He is not alone. More than one in 10 firms surveyed by Mercer, a consultancy–and one in five retail and hospitality companies–say they will cut workers’ hours because of Obamacare. A hundred part-timers can flip as many burgers as 50 full-timers, and the former will soon be much cheaper.
Part-time jobs have been a driver of new jobs this year, supporting the theory that this shift is happening nationally.
But economists warn that Obamacare may be just one of many factors causing this.
“Job growth has been overshooting GDP growth by a substantial margin this year,” noted Credit Suisse’s Neal Soss in an August research note. “And while there are numerous hypotheses as to why that might be happening (lower productivity, doubling-up of part-time workers due to Obamacare concerns, and others), none are entirely convincing.”
So, what do the jobs numbers actually say?
Well, employers wishing to “game the law” would most likely be going after the jobs that are already near the 30-hour work week level.
Wells Fargo’s John Silvia looked into this.
“If managers were engaging in a conscious effort to reduce employee hours to less than 30 hours per week, so as to make those workers ‘part-time’ employees and, therefore, not subject to the employer mandate of the ACA, then it seems reasonable that hours would be falling most in industries closest to this cutoff point,” wrote Silvia. “There is some indication that employers have been reducing hours in preparation for the ACA, but a slightly longer-term view of the macro data does not yet offer conclusive evidence on the prevalence of this practice.”
“There is no empirical evidence that hiring practices relate to concerns over benefits,” argued Westwood Capital’s Daniel Alpert on the matter.
So, while it might make intuitive sense that employers would cut hours because of Obamacare, and while there may be anecdotes that employers are blaming Obamacare for reducing hours, the jury’s still out on whether Obamacare is really having a material impact on the U.S. labour market.