Obamacare will push workers to cut hours

  • Article by: CHICAGO TRIBUNE EDITORIAL
  • Updated: July 31, 2013 - 7:25 PM

Workers will have a big incentive to embrace more part-time employment. That's not necessarily a bad thing.

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This artwork relates to the Affordable Health Care Act, also known as Obamacare.

Photo: Jennifer Kohnke, Tribune Media Services

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The Affordable Care Act will give companies - and, surprisingly, their workers - a big incentive to embrace more part-time employment. That isn’t necessarily a problem, except when it comes to paying the health-insurance bills for all those part-timers. Looks like that job will fall to you, taxpayers.

Some of the motives at play here will strike you as familiar; others are fresh insights on the part-timing of America.

Opponents of Obamacare have long predicted that the 2010 law would lead to reduced working hours for many Americans. We all know from high-profile announcements that some employers, notably restaurants, plan to avoid hiring full-time workers because of the new health care rules:

Under Obamacare, employers with 50 or more full-time workers will be required to offer health insurance to those putting in at least 30 hours a week, or pay a penalty. That’s a big incentive to keep the staff at 49 full-timers or, if the business demands more bodies, a big incentive to have as many employees as possible working a maximum of 29 hours.

Turns out the incentives to go part time will be even greater than we suspected: Several million employees could work fewer hours for as much take-home pay by shifting to part-time labor. University of Chicago economist Casey Mulligan has his finger on how that will work. As the law kicks in, the incentive for some workers will be so strong that free-market champion Mulligan says only “chumps” would resist it.

Mulligan has laid out his finding in a column on The New York Times’ Economix blog. He notes that a key advantage of most full-time jobs is access to company-provided health benefits. He estimates that a middle-income, full-time worker pays $4,667 a year, and his or her employer pays $9,333, for family medical insurance.

Under Obamacare, that advantage will be reversed for some workers. The law subsidizes health costs for families that earn up to 400 percent of the federal poverty line, which is about half of all U.S. households (excluding the elderly, who have Medicare and Medicaid). But the government subsidies only will go to workers whose employers don’t offer insurance. That is, most people who work full time will be ineligible for subsidies. Those workers and their employers will be expected to keep paying a bundle for coverage.

Not so for the part-timer. The law limits premiums he or she will pay to $2,149 a year. His or her employer need pay nothing at all. The Affordable Care Act also subsidizes part-timers’ deductibles, co-payments and other out-of-pocket expenses, that exceed $2,193. By Mulligan’s estimate, Washington could pay some $12,658 in premiums, and $2,907 in out-of-pocket costs, for a part-timer earning $42,000.

Hence Mulligan’s revelation: This deal is so generous that several million workers will be able to earn as much take-home pay in part-time positions with lower pay as they would in higher-paying full-time jobs that don’t get the federal health subsidies. The government - that is, taxpayers - will cover most of the part-timer’s costs.

The law’s potential economic distortions are so damaging, he says, that he never thought it would go into effect: “I guess I would have been (one of) those people in 1916 who said that communism would never happen.”

We have yet to see Obamacare’s full impact. The mandate requiring individuals to have coverage starts in January 2014; the mandate requiring employers to offer coverage has been postponed for at least another year. But if nothing changes, America will have a reason to go increasingly part time.

Many commentators have lamented the surge in part-time work since the recession. We don’t see it as a problem for this country - yet. About two-thirds of Americans working part time say they do so by choice, as opposed to being unable to find full-time work or having their hours cut involuntarily.

As the workforce ages and lifestyles change, it’s a plus when employers can adapt their employees’ schedules accordingly. America’s adaptable labor market has helped it limp back from the recession.

It’s troubling, though, that as the abutting graphic suggests, too many part-timers who would rather have full-time jobs just aren’t finding them. The question going forward is whether those workers ever will attain what they want - or whether they and their potential employers will decide that full-time jobs are too costly for both of them.

Part-time work does become a problem when Washington tilts the balance of incentives against full-time work. Not only will Obamacare raise costs for the government, it stands to make one of the most competitive features of the U.S. economy - a flexible labor market - less efficient.

One more reason to rewrite, or halt, Obamacare.

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