Report: Under Obamacare, less-skilled workers will be most likely to be priced out of jobs

While the president talks and talks and talks about his commitment to “put people back to work,” Obamacare continues to make it less likely that unskilled workers will find full-time jobs, according to new research from Heritage Foundation labor expert James Sherk.

When an employer hires a full-time worker, he is legally bound to pay the minimum wage, the employer share of payroll taxes and unemployment insurance taxes. Now, thanks to Obamacare, that employer will also have to pay nearly $3,600 for a single employee or more than $11,000 for an employee with a family to provide the health coverage that PPACA requires him to provide.

The employer premiums for a single plan, distributed across a full-time work year, will add $1.79 per hour to these labor costs. The premiums for a family plan will add $5.51 per hour. Nationwide minimum labor costs will rise to an average of $10.03 per hour for full-time workers with a single health plan and $13.75 per hour for workers with family coverage.

If the employer doesn’t provide coverage — and has more than 50 employees — he’ll have to pay a $2,000 penalty for each employee. That actually might be cheaper in some instances — but will still mean minimum hiring costs will go up.

So, how will employers likely respond to all of this? You can bet it won’t be to hire more full-time workers. Employers don’t have to pay a penalty for part-time workers, so they have incentive to hire part-time workers at the expense of full-time workers. Sherk explains:

Moderately and highly skilled workers already cost more than this minimum to employ. Their employers will likely respond to the law by spending more on health benefits and reducing wages by a corresponding amount. The health care law will not increase their total compensation costs.

But it is an entirely different story for unskilled workers. Employers cannot reduce cash pay below the minimum wage. However, employers will not pay workers more than their productivity. No businesses will pay $14 per hour to employ a worker whose labor raises earnings by just $9 per hour. Businesses that pay workers more than their productivity quickly go out of business. …

Obamacare hurts less skilled workers. It raises the minimum productivity required for them to hold a full-time job, particularly workers with families. Workers who cannot produce at least $20,000 per year (single plan) or $27,500 per year (family plan) of value to employers will have serious difficulty finding full-time jobs. Many of these workers will have to either live off reduced income from part-time hours or juggle the schedules of multiple part-time jobs.

Workers with productivity near this minimum will also face challenges. The law forces them to consume a substantial portion of their income as health benefits whether they want to or not. Take a full-time worker in Delaware with a family health plan earning the federal minimum wage. The employee and employer share of health care premiums for that plan will cost an average of $6.41 per hour. After paying the employee share of premiums, that worker will earn $6.56 per hour in cash wages. The law requires unskilled employees who do not get dumped into the exchanges to receive almost half of their compensation as health benefits. Workers who would like higher wages and less expensive health coverage do not get a choice.

Pretty much since PPACA passed, it’s been clear to small-business owners that it would be a burden. Sherk’s research reveals specifically just what a burden it would be. Nearly $2 per hour in labor costs for a single employee or more than $5 in labor costs for an employee with family coverage is really nothing to sneeze at — but, to hear the president talk, he hasn’t contributed a mite to the unemployment numbers in the United States. Now more than ever is the time to remind him that he’s had his day and the policies he implemented — from the stimulus to Obamacare to new financial regulation — not only haven’t helped; they’ve hurt. The House has already passed a bill to repeal Obamacare. Seems to me, if the Senate and the president are really as keen to create jobs as they say they are, they should stop stalling on the House-passed repeal. After all, as president himself says, the jobless can’t afford to wait another 13 months.

Exit question: What would it to do to the president’s reelection chances if, all of a sudden, out of the clear blue, he admitted it’d be better to just scrap Obamacare entirely and start over with healthcare reform? Fat chance of that, obviously, but, hey, a girl can dream.

Blowback