Obamacare's War on Full-Time Jobs Will Sucker Punch EconomyPolitics / Employment Apr 19, 2013 - 12:12 PM GMT
David Zeiler writes: Obamacare's rules regarding hours worked and employer-sponsored healthcare coverage have entire industries looking at cutting down on their number of full-time employees in favor of more part-time employees.
Large industries affected include hotels, restaurants and retailers, as well as small businesses of all stripes.
In essence, the hefty financial burden imposed by Obamacare for having too many full-time employees is creating a huge incentive for many employers to cut workers' hours, or, in some cases, avoid hiring altogether.
Tens of millions of American workers are at risk of being denied employer-sponsored health insurance as a result, and will end up with less pay to boot.
It could be a disaster for the still-lagging U.S. economy.
"If you want to have reduced work, lower wages and economic stagnation, this is a great way to do it," Ed Haislmaier, a senior research fellow at the Heritage Foundation, told FOX News.
How Obamacare Discourages Full-Time Jobs
In trying to achieve the goal of having health insurance for all Americans, Obamacare - officially known as the Affordable Care Act - created specific requirements for employers.
The Obamacare law says that every employer that has 50 or more full-time employees must offer health insurance to anyone who qualifies as full-time, defined as anyone who works at least 30 hours a week.
Employers that fail to offer health insurance as required must pay a penalty of $2,000 per worker beyond the threshold of 30 employees. Yes, that means hire No. 50 isn't a $2,000 a year penalty - it's a $40,000 a year penalty.
Of course, every hire after that incurs another $2,000 a year, so adding more full-time employees in the absence of a health insurance plan can get very expensive.
Franchise industries (like fast-food and restaurant chains) and other small businesses often operate on thin profit margins - the net profit averages 3.5 %.
That's why such businesses have rarely offered healthcare benefits in the first place. They'll do whatever it takes to stay beneath the Obamacare thresholds.
"Many stores will have to cut worker hours out of necessity. It could be the difference between staying in business or going out of business," Stephen Caldeira, president of the International Franchise Association, told The Wall Street Journal.
Obamacare could cost the franchise industry $6.4 billion and put 3.2 million jobs at risk, according to a study done in 2011 by the Hudson Institute.
Meet Obamacare's "49ers" and "29ers"
Many smaller companies have already started to limit hiring to 49 employees to avoid the Obamacare triggers, earning the nickname "49ers."
Meanwhile, service-oriented businesses are seeking to keep work weeks below 30 hours - the "29ers" - because they don't have to offer health insurance to part-time workers.
According to The Wall Street Journal, franchisees of Burger King, McDonald's, Red Lobster, KFC, Dunkin' Donuts and Taco Bell have all started to nudge employees into part-time hours.
They can't afford to wait until the law goes into effect Jan. 1 because Obamacare will base the status of employees on their work schedule in 2013.
Just this week, Regal Entertainment Group, which operates 500 movie houses in 38 states, said it has cut the schedule of thousands of employees to less than 30 hours a week. A company memo blamed the move on Obamacare.
Even some states have shifted their employment policies in response to the Obamacare requirements.
Earlier this year, Virginia Gov. Bob McDonnell told state agencies to reduce hours worked by part-time employees to less than 30 to avoid an estimated increase in annual health insurance costs to the state of $61 million to $110 million.
Lost Pay Will Damage U.S. Economy
The biggest losers here, of course, are the millions of workers affected by these changes.
Their reduced hours will ensure that not only will they be denied employee-sponsored health insurance, they'll also be forced by law to buy health insurance from an Obamacare exchange or face financial penalties themselves.
Worst of all, the reduced hours will mean less pay.
The last thing workers making less-than-average wages need is a pay cut.
Equally concerning is the Obamacare-generated bias toward part-time workers, which we're already seeing.
According to Gallup, part-time jobs have risen from 17.6% of the labor force last July to 20.6% in February. That's an ominous trend.
A rising proportion of part-time workers making less money will put a new drag on the U.S. economy, 70% of which is driven by consumer spending.
When you add in the number of jobs that won't be created because of companies trying to stay below the 50-employee threshold, it's clear that Obamacare is going to be a hard pill for American workers to swallow.
"Democrats who thought they were doing workers a favor by mandating health coverage can't seem to understand that it doesn't help workers to give them healthcare if they can't get a full-time job that pays the rest of their bills," The Wall Street Journal observed in a recent editorial.
©2013 Monument Street Publishing. All Rights Reserved. Protected by copyright laws of the United States and international treaties. Any reproduction, copying, or redistribution (electronic or otherwise, including on the world wide web), of content from this website, in whole or in part, is strictly prohibited without the express written permission of Monument Street Publishing. 105 West Monument Street, Baltimore MD 21201, Email: email@example.com
Disclaimer: Nothing published by Money Morning should be considered personalized investment advice. Although our employees may answer your general customer service questions, they are not licensed under securities laws to address your particular investment situation. No communication by our employees to you should be deemed as personalized investent advice. We expressly forbid our writers from having a financial interest in any security recommended to our readers. All of our employees and agents must wait 24 hours after on-line publication, or after the mailing of printed-only publication prior to following an initial recommendation. Any investments recommended by Money Morning should be made only after consulting with your investment advisor and only after reviewing the prospectus or financial statements of the company.
Money Morning Archive
© 2005-2015 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.