The unintended but foreseeable consequences of Obamacare

The jobs report for April has been released and the news is mixed. The economy added 270,000 jobs, but this was not enough to offset the rise in the number of people looking for work. Accordingly, the unemployment rate rose from 9.7 percent to 9.9 percent.
Meanwhile, Diana Furchtgott-Roth of the Manhattan Institute explains why Obamacare is likely to cause employers not to hire as many workers as they otherwise would, particularly among the ranks of the unskilled and the young.
Two of the industries that traditionally offer work to members of these groups are leisure/hospitality and retail. As Furchtgott-Roth explains, many of these employers do not provide their employees with health insurance, and both sectors have large percentages of part-time workers. Obamacare threatens to raise costs in these sectors because every employer with more than 50 workers will either have to offer health insurance or pay an annual penalty of $2,000 per worker. For part-timers, employers will pay $2,000 for each “full-time equivalent worker,” a block of 30 weekly hours of part-time work by the same or different employees.
Employers thus have a strong incentive not to employ more than 50 workers. By avoiding that threshold, they won’t have to provide health insurance and will gain a cost advantage over competitors.
Accordingly, says Furchtgott-Roth:

Firms will have an incentive to become more automated, or machinery-intensive – and hire fewer workers. Fast food restaurants could ship in more food and have it reheated, rather than cooking it on the premises. Department stores could have fewer sales clerks and more price-scanning stations, so that shoppers could scan labels for prices rather than asking sales assistants.

Thus, in the name of expanding health care coverage the administration is making it harder than ever for unskilled workers to get started in the workforce. This is particularly unfortunate because adults without high school diplomas currently face an unemployment rate of 14.5%, and the unemployment rate for teens is 26%.
In some ways, generic claims that President Obama should have focused more on getting Americans back to work and less on transformative legislation like health care reform are too facile. A president need not devote large amounts of time to figuring out how to improve the short-term jobs outlook because there is little a president reasonably can do to put Americans back to work in the short-term.
But a president who pushes through legislation, the natural effect of which is to discourage hiring, deserves criticism when the job market lags (and even when it doesn’t). Obama has now put himself in that category.

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