A Nation of Part-Time Workers, Thanks to Obamacare

The Affordable Care Act not only makes
hiring full-time workers more expensive for employers than
part-timers, according to a new research paper, it also directly
penalizes full-time workers. That will drive at least some people
to—perversely—reduce their hours in order to increase their
compensation. The end result for the country is likely to be the
equivalent of 4 million fewer full-time-workers.

In “The
Affordable Care Act and the New Economics of Part-Time Work,”
Casey B. Mulligan, professor of economics at the University of
Chicago, writes, “Three major provisions of the ACA introduce
incentives to change the workweek. The most obvious is the explicit
penalty on assessable large employers that do not offer health
insurance to their full-time employees.” Employers are not required
to offer benefits to part-time employees, creating an obvious
incentive to reduce working hours and rely on part-time and
contract employees instead of full-time workers.

In fact, Federal Reserve Banks around the country find exactly
that pattern underway when they survey employers. After polling
manufacturers and business leaders in August, the
New York Federal Reserve Bank found:

About 20 percent of respondents in both surveys said that
they were reducing the number of workers and/or raising the share
of part-time workers. A similar proportion said they were paying
less compensation per worker because of the ACA, and a similar
proportion of manufacturers said they were outsourcing more
work.

The Federal Reserve Bank of Dallas
received remarkably similar answers to a survey of
service-sector employers. Because of costs imposed by the Afordable
Care Act, 20.8 percent of them said the number of people they
employ will be lower (2.7 percent say it will be higher).
And 22.4 percent say they’ll use a higher proportion of
cost-reducing part-time, contract, or temporary workers (7.1
percent will use fewer).

Federal Reserve Banks in
Philadelphia and Atlanta reported similar responses.

But Mulligan adds that, in addition to disincentives for
employers to use full-time workers, the ACA also nudges workers to
reduce their hours with the “provision that full-time employees and
their families cannot receive subsidized health coverage on the
ACA’s health insurance exchanges…unless their employer fails to
offer affordable coverage.” Some employees also have an incentive
to work less because of “the provision that gives lower subsidies
to families with higher incomes.” Under the law, a good many
workers stand to make more money, once subsidies are included, by
working below the part-time threshold than by working
full-time.

These pressures on workers to put in fewer hours may actually be
stronger than those more widely discussed incentives for employers
to cut hours.

How big a disincentive? Mulligan compares a 40-hour-per-week
full-timer at $52,000 annually to a 29-hour-per-week part-timer at
$37,700. After taxes, expenses, and subsidies, the part-timer walks
away with $28,854, compared to $27,021 for the full-timer.

The bottom line, says Mulligan, is that:

• The ACA’s employment taxes create strong incentives to work
  less. The health subsidies’ structure will put millions in a
  position in which working part time (29 hours or fewer, as defined
  by the ACA) will yield more disposable income than working their
  normal full-time schedule.
• The reduction in weekly employment due to these ACA
  disincentives is estimated to be about 3 percent, or about 4
  million fewer full-time-equivalent workers. This is the aggregate
  result of the law’s employment disincentives, and is nearly double
  the impact most recently estimated by the Congressional Budget
  Office.
• Nearly half of American workers will be affected by at least
  one of the ACA’s employment taxes—and this does not account for the
  indirect effect on others as the labor market adjusts.
• The ACA will push more women than men into part-time work.
  Because a greater percentage of women work just above 30 hours per
  week, it is women who will be more likely to drop to part-time work
  as defined by the ACA.

Hmmm…Many Americans can make more by working less and taking
tax-funded subsidies. And we’ll have the equivalent of 4 million
fewer people working, as a result (and paying the taxes for those
subsidies).

You have to wonder what that will do to the economy.