Obamacare prompting businesses to cut employee hours? So far, yes and no.


The health care law requires every company with more than 50 workers to offer health coverage to employees who work at least 30 hours per week. (Andrew Burton/Getty Images)
October 30, 2013

One of the common warnings from critics of the new health care law has been that companies will slash employee hours in order to avoid new rules requiring them to provide insurance to full-time workers. In turn, some say, more of the nation’s workforce will be left with part-time jobs and pint-sized paychecks.

But is that actually happening? It depends where you look.

The new health care law requires every company with more than 50 workers to offer a health plan to employees who work at least 30 hours per week. Originally, the mandate was scheduled to start next year based on 2013 employee headcounts, though this summer, federal regulators said they would delay enforcement for one year.

Opponents of the law have zeroed in on the rule, warning, for instance, that it will prompt employers to limit workers to fewer than 30 hours per week in order to limit the number of employees their companies must cover.

During a recent congressional hearing, Dean Baker, a macroeconomist and co-director for the Center for Economic and Policy Research in Washington, argued there is little evidence the law is having an effect on workers’ hours. He cited government data showing that the percentage of Americans who work between 26 and 29 hours per week has barely budged this year, inching up from 0.61 percent of the workforce in 2012 to 0.64 percent in 2013.

What’s more, according to the data, even that tiny increase cannot be attributed to employers cutting hours for previously full-time workers, as the number of employees who work exactly 30 hours, between 31 and 34 hours, and more than 35 hours have all increased over the past year. It has been the number of workers in the 1-to-19 and 20-to-24 hour blocks that have declined in 2013.

“I’m not saying there’s been a big increase in full-time employment, but it goes in the wrong direction from change that critics of the [Affordable Care Act] have raised,” the Baker said.

In addition, the number of “involuntary” part-time workers (those who want but cannot find full-time work) spiked during the heart of the recession in 2008, two years before the health care law was signed, according to Labor Department figures. Over the past five years, the number has fallen steadily from that peak.

In September, for example, 7.8 million Americans were working part-time jobs but said they wanted full-time work, down from 8.5 million one year ago.

“In terms of employers moving people from full-time to part-time over the long term, I would be surprised if there isn’t some of that going on,” Baker said, however, “over the first six months of this year, when they thought the rules would be in place, that’s just not showing up in the data.”

Others say Baker is only looking at half of the equation.

Raymond Keating, chief economist for the Small Business and Entrepreneurship Council in Vienna, Va., pushed back against Baker’s analysis during the hearing, arguing that it ignores a discouraging pattern in the number of hours firms are offering to new hires.

During the first four years of the recovery, Keating pointed out, government statistics show that 90 percent of new jobs created were full-time jobs. In the past eight months, however, nearly two-thirds of new openings have been part-time positions.

“That’s a striking number, that’s a striking break from what normally happens, and I think it speaks to the issue of how part-time workers are treated under Obamacare compared to full-time workers,” Keating said.

In addition, a new poll by the Small Business and Entrepreneurship Council suggests that, of the minority of small employers who are planning to add jobs in the next six months, 77 percent said they are planning to add part-time workers compared to 57 percent who said they are planning to add full-timers. And a third of the employers polled said the health care law has had an effect on their hiring decisions.

Keating’s concerns are playing out at one company just outside of Washington.

David Glazier, founder and president of Fleet Transportation, a luxury car service based in Alexandria, Va., offers health insurance right now to his 25 full-time employees, but soon he will be required to provide it to all of his part-timers who work between 30 and 39 hours per week.

Glazier says he has not considered cutting hours for his current part-time workers and plans to extend his current health plan to each of them. However, he has also been planning to add a new position in the coming months, and in response to the rule, he is strongly considering adding two new part-time workers rather than a single full-time worker — all because of the health care requirement.

“It would obviously be a lot easier to find one person,” Glazier said. “But if splitting it into two jobs means we save on our insurance bill, that might be a better option for us right now.”

Follow J.D. Harrison and On Small Business on Twitter.

J.D. Harrison covers startups, small business and entrepreneurship, with a focus on public policy, and he runs the On Small Business blog.
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