Green Room

Surprise: Obamacare-wary employers not hiring, cutting hours

posted at 1:16 pm on January 3, 2013 by

The real knife twist in this USA Today piece is the money quote from Mark Zandi, The One’s go-to “independent” economist:

Many businesses plan to bring on more part-time workers next year, trim the hours of full-time employees or curtail hiring because of the new health care law, human resource firms say. Their actions could further dampen job growth, which already is threatened by possible federal budget cutbacks resulting from the tax increases and spending cuts known as the fiscal cliff. “It will have a negative impact on job creation” in 2013, says Mark Zandi, chief economist of Moody’s Analytics…The so-called employer mandate to offer health coverage doesn’t take effect until Jan. 1, 2014. But to determine whether employees work enough hours on average to receive benefits, employers must track their schedules for three to 12 months prior to 2014 — meaning many are restructuring payrolls now or will do so early next year.

How widespread will the fallout be?  Very:

About a quarter of businesses surveyed by consulting firm Mercer don’t offer health coverage to employees who work at least 30 hours a week. Half of them plan to make changes so fewer employees work that many hours. The health care law will particularly affect companies with 40 to 45 workers that plan to expand and hire. Many are holding off so they don’t cross the 50-employee threshold, says Christine Ippolito, principal at Compass Workforce Solutions, a human resource consulting firm in Melville, N.Y. Ernie Canadeo, president of EGC Group, a Melville-based advertising and marketing agency with 45 employees, planned to add 10 next year but now says he may add fewer so he’s not subject to the mandate…Others already over the 50-employee threshold plan to add more part-time workers or cut the hours of full-timers, says Rob Wilson, head of Employco, a human resource outsourcing firm. Many, he says, will hire more temporary workers, whom they won’t have to cover.

Nearly half of retailers, restaurants and hotels will be affected by the law, according to Mercer. They employ large numbers of part-time and seasonal employees, including many who work about 30 hours a week. Since such low-wage workers are widely available, it often hasn’t been cost-effective or necessary for employers to offer them coverage. Providing them benefits could be costly because employees must pay no more than 9.5% of their wages in insurance premiums, forcing employers to contribute significantly more than they do for higher-wage workers. “I think you may see employees with fewer hours as a consequence,” says Neil Trautwein, vice president of the National Retail Federation.

So the law sets an arbitrary cap on the percentage of wages workers are permitted to contribute to their health benefits — the initial intent of which, presumably, was to compel employers to shell out to help cover more employees.  But instead of complying with the mandate and spending money they either (a) don’t have or (b) need for other purposes, cash-strapped small business owners are planning to shave hours and provide less work for their employees.  That’s not greed; it’s business reality in a stagnant economy.  The clumsy and meddlesome heavy hand of Big Government strikes again, hurting many of very the people it set out to “help.”  None of this should surprise anyone, of course.  Obamacare opponents have long argued that this project would spike spending and debt, deprive Americans of liberty, and destroy jobs.  These predictions are being vindicated with each passing day, hence the law’s enduring unpopularity.  And as the article notes, many of the most onerous mandates don’t cycle in until 2014, so the pain is just beginning.  For what it’s worth, the CBO has estimated that the president’s signature legislative accomplishment will kill 800,000 jobs.

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