The (low) wages of Obamacare

The mandate to offer health insurance doesn’t take effect until 2014, but the “measurement period” used to determine a whether an employer has enough full-time employees to be required to offer health insurance commenced last month. Thus, as the Wall Street Journal reports, the perverse effects of Obamacare are starting to kick in.

Under Obamacare, firms with 50 or more “full-time equivalent workers” must offer health plans to employees who work more than 30 hours a week. (The law says “equivalent” because two 15 hour a week workers equal one full-time worker.) Employers that meet the 50-employee threshold and don’t offer insurance face a $2,000 penalty for each uncovered worker beyond 30 employees. So by hiring the 50th worker, the firm pays a penalty on the previous 20 as well.

Accordingly, employers are beginning to cut back on full-time employment. Franchises, with their low profit margins, are leading the charge to cut the hours of their employees. The Journal cites Burger King, McDonalds, Red Lobster, KFC, Dunkin’ Donuts and Taco Bell.

But franchises aren’t the only ones. A 2012 survey of employers by the Mercer consulting firm found that 67% of retail and wholesale firms that don’t offer insurance coverage today “are more inclined to change their workforce strategy so that fewer employees meet that [30 hour a week] threshold.”

“Changes in workforce strategy” are not limited to resorting to part-timers. Some employers will avoid the 50 employee threshold by not engaging in additional hiring or by discharging full-time workers.

There would never be a good time to witness this trend, but the present timing could hardly be worse. As the Journal reminds us:

Involuntary part-time U.S. employment is already near a record high. The latest Department of Labor employment survey counts roughly eight million Americans who want a full-time job but are stuck in a part-time holding pattern. That number is down only 520,000 since January 2010 and it is 309,000 higher than last March. And now comes ObamaCare to increase the incentive for employers to hire only part-time workers.

Under Obamacare those who lose hours or jobs due to the mandate will be able to obtain health insurance. But they will be increasingly hard-pressed to take care of the rest of their needs.


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