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Home Publications Blogs Beat the Press It Ain't Obamacare or Skills: Full-time Nonsense on Part-Time Employment

It Ain't Obamacare or Skills: Full-time Nonsense on Part-Time Employment

Thursday, 07 August 2014 11:25

Involuntary part-time employment has fallen by 670,000 over the last year, however it's still up by almost 3 million from its pre-recession level. While there would seem to be a very simple and obvious explanation for this one -- weak demand in the economy -- you can't employ many people saying the obvious. Hence we see a lot of nonsense in the media on the topic.

The latest installment comes to us from McClatchy News Service. The story is that the problem is skills and employer sanctions in Obamacare.

"One reason is a gap in the kinds of skills needed to find work in an increasingly technological workplace. Many employers also remain uncertain about the economy and hesitant about deeper financial commitments.

"And hiring part-time instead full-time employees is one way that some businesses are getting around the costs of a mandate in the health care law that requires employers with 50 or more full-time workers to provide insurance coverage beginning in January."

Let's see, the problem is a gap in skills. So employers have those full-time jobs out there, the problem is that workers just don't have the skills needed to fill them.

Let's assume this is true. Imagine you're one of those frustrated employers. You have all this demand for your service or product, but the dolts coming through your door just don't have the skills needed for your increasingly technological workplace. What might you do to solve this problem?

That's right, you could raise wages. This way you would pull away the workers who have these skills from your slow moving competitors.

There is a problem here. We don't have any major sector of the economy with rapidly rising wages. (Yes, North Dakota has rapidly rising wages and it employs about 0.3 percent of the workforce.) This indicates that we either don't have a skills gap or if we do it exists primarily among employers who don't understand how labor markets work.

A piece of data that doesn't fit well with the skills gap story is that the sector with the most rapid growth since the downturn has been the leisure and hospitality sector, which has added 1,120,000 jobs (total employment in all other sectors together is still below the pre-recession level). This sector is not generally considered to be at the center of the technological revolution. It also has an averagework week of 25.1 hours.

The Obamacare part of the story also doesn't fit the data. Employers would have thought that the employer sanctions applied for the first half of 2013 until the Obama administration announced a waiver in July of that year. During this period there was a modest increase in the share of the workforce working 25-29 hours, just under the 30 hour cutoff for the sanction. However this increase was totally at the expense of the share working less than 25 hours. The portion of the workforce putting in more than 30 hours a week actually increased.  

In short, there is zero reason to believe that the increase in involuntary part-time employment has anything to do with either a skills gap or Obamacare. There is a simple explanation based on inadequate demand since we haven't filled the gap created by the collapse of the housing bubble. Unlike the more complicated explanations, this one fits the data.


Comments (4)Add Comment
written by jhaskell, August 07, 2014 12:34
The one issue that no skills gap proponent has yet answered is this. Let's assume what the proponents of the skills gap have been telling as true; there's a skills gap, it's the reason for weak hiring and why job growth over the past few years has been weak.

How is it, then, did the structure of the economy shift so suddenly from 2008 to 2010 when businesses were not making large investments that would necessitate a change in their demand for labor?

Ignoring the wage and hour data, ignoring the sagging labor market indicators across education levels, the argument that the skills gap descended so quickly does not pass the straight face test.
In a Weak Labor Market, Equivalent Part Time Labor Can Be Paid More and Cost Less at the Same Time
written by Last Mover, August 07, 2014 3:25
Health care coverage for one of Clarke’s full-time employees costs about $13,000 a year. On top of a salary, the costs create little incentive for employers to hire full-time workers into positions that already have low profitability, said Clarke, who emphasized his views are economically, not politically, driven.

“If I’m going to bring someone in a role that has a low margin (of profit) in it,” he said, “then it makes no economic sense to add $13,000 to the cost of that role.”

In a tight labor market this doesn't make sense because wages and insurance are highly substitutable. If employers did not provide insurance they would have to pay higher wages instead. It would apply to full or part time workers.

It can make sense in a very weak labor market like today. The $13k is a fixed cost for full time employees, where the wage paid can be leveraged heavily downward below what would be paid in a tight labor market.

Since the employer can avoid the $13k altogether by hiring part time employees in the same weak market, the question is whether the same leverage is applied to reduce part time wages in proportion to the reduction in full time wages.

Maybe, but the employer also has more room to pay part time workers a little more than that given avoidance of the $13k - not anywhere near enough for the employee to buy his or her own insurance - but enough to attract, train and keep more part timers and reduce the turnover rate - compared to hiring equivalent full time employees for whom there is more incentive to drive wages paid more than proportionately lower compared to part time wages, due to the $13k.

In short, Clarke can fill positions of "low profitability" (and low skills) in a weak labor market at a lower net cost for equivalent part time labor than full time labor, when all costs are considered. Uncertainty has nothing to do with it.
written by s ken brown, August 08, 2014 7:29

Here's some supporting data on Dean's assertion about demand. If you believe the data, demand is down $800B (Hint: Believe data, ignore hype and learn to tell the difference).
who pays for the insurance matters
written by pete, August 08, 2014 9:52
For low paying jobs, if the firm pays insurance, they pay the whole thing. If the employee pays the insurance, they get a discount from the Feds. Thus there is a wedge. Most low wage workers would be better off without employer insurance since the firm could pay them more and they would get the rebate from Obama. The employer penalty cuts into that increased pay, unfortunately.

I thought of this since I work for a nonprofit institution, and thus there is no tax advantage to having the employer pay for the insurance. Our low wage employees would be much better off with increased pay and no employer provided insurance.

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About Beat the Press

Dean Baker is co-director of the Center for Economic and Policy Research in Washington, D.C. He is the author of several books, his latest being The End of Loser Liberalism: Making Markets Progressive. Read more about Dean.