Sounds benign, right? Wrong. In fact, Republican leader Rep. Paul Ryan (Wis.) got the impact of this change exactly backwards when he claimed that the bill would enable “more people [to] work full time.” It actually pushes in the opposite direction. Oh, and it would also add $53 billion to the budget deficit over the next decade.
The main reason why Ryan has this backwards comes down to a simple, common sense observation that anyone with passing knowledge of the job market should know. Take this quiz, which you have a 50 percent chance of passing: Do more people work a) 30 hours a week or b) 40 hours a week?
The answer, by a long shot, is b. According to my Center on Budget colleague Paul Van de Water, 44 percent of the workforce was employed 40 hours per week last year, while seven percent works 30 to 34 hours (the Bureau of Labor Statistics does not provide the exact 30 hours share of workers, but it would, of course, be less than seven percent).
Now, suppose an employer decided to cut its workers’ hours to avoid facing the coverage mandate (important point here: this would only apply to employers that are not already providing coverage). There’s little evidence of this happening so far, though the mandate is just phasing in. But it’s certainly a possible reaction.
What the House bill does then is expose millions more workers to this incentive. The smart policy move here is to target the mandate at a part of the hours distribution were workers are not bunched, but the House Republicans are doing the exact opposite: They’re targeting by far the most bunched part of the hours distribution (see figure above).
Here’s how the CBO sees it: “because many more workers work 40 hours per week (or slightly more) than work 30 hours per week (or slightly more), [the House bill] could lead employers to make changes that would affect many more workers than will be affected under current law.”
There are some caveats worth citing. In fact, though this change is seriously misguided, there are not that many workers at risk of having their hours cut. Van de Water cites research finding that the share of workers close to the 30-hour threshold who are employed by businesses affected by the employer mandate and do not already have coverage (i.e., the group vulnerable to the incentive to cut their hours) amounts to less than one-half of 1 percent of the workforce. And once you go up to those working 40 hours a week, you find that even more are already covered (and thus their employers do not face the penalty).
Still, according to CBO, the threshold change would cut the number of people with employer-based coverage by about 1 million, increasing both the number of parents and kids on Medicaid and on the subsidized exchanges while also raising the number of the uninsured. That’s why this change would raise the deficit.
I’m confident the Senate will block this wrong-headed idea, and I’m sure the White House will veto it. But while I’m not surprised, I’m discouraged that even “do no harm” appears to be too high a bar for the new Congress.