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Home Publications Blogs Beat the Press Opponents of Obamacare Predict a Hiring Boom

Opponents of Obamacare Predict a Hiring Boom

Wednesday, 03 July 2013 04:02

That's what they would expect if they ever took their own arguments seriously. The claim that the bill was a job-killer hinged on the notion that the penalties applied to firms with more than 50 workers who did not provide insurance would discourage hiring. The penalties also supposedly encouraged firms to reduce hours since they only applied to workers who worked more than 30 hours a week.

The economy should have already been seeing the negative impact of these requirements (contrary to what is implied in this NYT article) since the penalty provision was supposed to take effect in 2014 based on employment in 2013. This means that if the penalties actually were affecting hiring, then we should soon see a hiring boom as firms need no longer fear being over the 50 worker threshold in 2013. (They need not worry about this year's hiring pushing them over the cutoff for next year. Roughly 3 percent of the workforce leaves their job every month (roughly half voluntarily and half involuntarily), so if hires in 2013 pushed employers above the threshold, they would have little difficulty getting back under the 50 worker threshold in 2014.

This means that the delay of the imposition of the penalty provides a great test of the extent to which the Affordable Care Act really is a job killer. Anyone taking bets on the size of the hiring surge in the second half of 2013?

Comments (13)Add Comment
written by Jennifer, July 03, 2013 6:19
It really is unfortunate that the administration could not get it together, whether the reasons they gave are true or if it was sheer politics. It's hard to imagine that hiring boom, besides the reasons that you mentioned, the actual number of people involved is not large. Per Tim Jost, 98% of employers with over 200 employees offer insurance, and 94% of employers with 50-199 do as well. bit.ly/12FrZ5y
So What Part of Obamacare Affects Hiring Decisions for Marginal Employees Anyway?
written by Last Mover, July 03, 2013 6:24

Why is this a problem with the free market crowd anyway? Any economist knows that insurance benefits and and wages are substitutes, so if an employer is required to provide insurance for the 51st employee and above, the employer simply pays a lower wage to offset that benefit, and the employee willingly accepts the job for no net loss.

Employees at or below the 50 mark as well are indifferent to whether they get the insurance or higher wages. Same applies to working less than 30 hours a week.

If no insurance is provided by employers, employees get more in wages to buy insurance through Obamacare exchange markets, which is nothing to snicker at given the high level of health care cost, which is also why younger, healthier employees beg for the money instead of the benefits.

Dean Baker has been lecturing them with this substitution equality for years, so the cruel joke that bottled up demand in 2013 will result in a hiring boom in 2014 is just another way to repeat it.

The free market crowd is so hysterically soaked in Obama hate it has lost its moorings in its own ideology, its own notion of what a free market is or could be under any circumstances at all.

Any other time they are crowing about the "marginal revolution" basis of "free markets", then conveniently go mute to contradict themselves when it comes to hiring decisions and Obamacare.
Rather Ridiculous, Low-rated comment [Show]
Interesting anecdote
written by jonny bakho, July 03, 2013 6:49
When is a full-time employee considered a full-time employee? According to the Affordable Care Act, it only takes 30 hours of work a week.

A bipartisan bill coauthored by Indiana Senator Joe Donnelly changes that. While part-time employees may miss out on health insurance, Donnelly and area school officials say it's better than no coverage and a smaller paycheck.

Donnelly met with Lafayette School Corporation officials..
With an employer mandate that had been looming Jan. 1, 2014, ...LSC is limiting all part-time employees to fewer than 30 hours a week so the district doesn't have to offer health insurance.

"Obviously not all of them will say yes, but we financially had to plan," says (LSC).

With 200 employees averaging 30-39 hours a week, the potential price tag was $2.5 million. It's a hit to the budget of more than $12,000 each for staff like bus drivers, teacher's aides and even some coaches.

Last month, along with Republican Senator Susan Collins of Maine, Donnelly introduced a bill that redefines full-time employees as those who work 40 hours or more. Donnelly says the legislation would affect the roughly 20 percent of the workforce who work that much but are not offered health benefits.

Meanwhile, Donnelly says, many of the 20 million Americans who work fewer than 40 but more than 30 hours weekly are finding, like LSC employees, they are getting no benefits and fewers hours.

"It's a very significant amount. What we're trying to do is make the transition very seamless and make it so they are not penalized for having the extra hours," says Donnelly (D).

Donnelly says the idea has bipartisan support, but both sides will have to compromise.

"Don't prevent this from occurring, simply because on one side, you don't want any changes to the health care bill because you are trying to protect the health care bill or on the other side, you don't want to try to make it better because you're trying to sink the whole bill, leave the politics out of this," says Donnelly.

As News 18 has already reported, it's not just LSC making plans for the employer mandate. Tippecanoe County has 48 part-timers who could cost up to $700,000.

"It's never too late. The bills are a work in progress," says Donnelly.

It is unknown at this time how this affects Lafayette's plans for part-time employees this fall.

(LSC) says if Donnelly's legislation passes, the district would only need two weeks to get back to full strength. "We're certainly hoping this bill would pass to give us the opportunity to go back to where we were....

I don't know how many employees this is nationwide, but school corps are large employers.
Arithmetic troubled employers
written by Dean, July 03, 2013 7:32
In his comment Johnny Bakho gave an interesting example of one of the biggest problems facing the country: employers who can't do the most simple arithmetic. According to the account he presented, The Lafayette School Corporation, which is described as having 200 employees, claims to have been worried about a hit of $2.5 million from the employer mandate in the ACA.

In fact, if all of its employees currently work more than 30 hours a week, and have low enough family income to qualify for subsidies, then it would be liable for a penalty of $600,000 under the ACA, less than one-fourth the amount indicated.

If even relatively large firms, like the Lafayette School Corporation, are run by people who can't even do very simple arithmetic calculations, then the economy is going to face very severe trouble going forward.
written by Ryan, July 03, 2013 7:36
Had the same thought this morning as I was wondering why no one was mentioning the expected hiring boom on Morning Joe this morning. My bet is about 150k per month (in other words, no effect).
written by kharris, July 03, 2013 8:05
If we take a simple-minded (or partisan) view, then it's just a case of jobs-off, then jobs-on. Most firms that I'm aware of are run by people with more on their minds that just weaseling around government regulations. Most of them try to make the most of what they have in the market they face. If there is an increased cost to hiring full-time workers, they hire part-timers to match their workforce to their market.

So, what we should see is a shift between payroll and household employment. Payrolls should have been boosted as more part-time workers were brought on to provide the same hours as fewer full-time workers. Households would receive a lesser boost, because some workers would get an additional part-time job as more part-time positions opened up. What we should be looking for is a slowdown in payroll hiring vs households now that the deadline has been pushed back.
written by watermelonpunch, July 03, 2013 8:21
It is true that health benefits are just another form of pay.
Frankly I think a lot of people don't realize this, and there are some businesses who benefit from people not understanding.

Public assistance like medicaid (etc) are also another form of pay for low wage Wal-Mart workers for example - tax payers are actually paying a portion of Wal-Mart workers' pay.

Why exactly is it wrong for taxpayers to object to businesses living off welfare benefits?

Our society demonizes individual working poor American citizens for receiving public assistance, yet applauds big corporations with huge profits & gargantuan CEO pay, who use taxpayer funded public benefits to pay their workers?

None of this makes sense.

I wonder what the free market people think would happen if we stopped subsidizing Wal-Mart workers with medicaid & food stamps, and suddenly all those Wal-Mart workers were working & still starving & possibly also sick?
Have any of them mentally played that video through to the end?

The scoops are on the way, the scoops are on the way.
@ Dean, Arithmetic troubled employers
written by jonny bakho, July 03, 2013 8:33
The 200 number are only those part time employees hired by the schools that might log 30-39 hours on occasion. The school district must employ well over 1000 people in total.

In Indiana, the public school districts are called "School Corporations". The Teachers are Union, so cutting benefits of teachers is not an option. Depending on salary, teachers may or may not qualify for subsidy. Most of the employees (who are full time) currently get health care benefits. It is only the part time employees who do not. It is the part timers that number 200.

Since the Public Schools are on a budget fixed by the State Legislature, the budget cannot expand to cover costs of benefits or penalties. The only way to control costs is to cut staff or staff hours, which means that hours will be cut. The State has a subsidized health insurance plan currently and those employees can currently get a subsidy out of another pot of money.

The incentive to not give part time employees more than 30 hours, though perverse, is large. It makes sense for them to hire more part time people each working fewer than 30 hours. This is why some form of Medicare buy in or single payer would make more sense. Employer based insurance makes the system more complex.
written by skeptonomist, July 03, 2013 9:02
Hiring level would be a test if nothing else happened in the economy. But in the real world hiring is affected by many other things besides decisions about health care - above all perception of demand. However, here is a safe prediction: if there is any upturn in hiring at all, many politicians and even some credentialed economists will claim that it was due to dropping the mandate. If hiring does not turn up, any of several other actions by the administration will be blamed.

Dropping the mandate will put more importance on the exchanges and other mechanisms (Medicaid) that apply to those not covered by employers. There will be a real test of these things and the outcome is not certain. The Rube Goldberg design of the ACA made it subject to changes like this and the significant crippling by the Supreme Court.
this aint obama's health care plan anyway!!!
written by pete, July 03, 2013 9:37
Stop already. He did not like this in 2008, absolutely stating that is was bad policy. It was Hillary's plan. He hated it. Bacchus wrote it. Pelosi signed on. No republicans voted for the final plan. So now, as he predicted, Obama states it is a bad plan. He is consistent with the 2008 Obama.
All the same, it's a regressive tax. Bad for a lot of workers
written by Rachel, July 05, 2013 8:16

The ACA takes from the young, the less-well-off, and the elderly, to give to many people making excess medical profits: hospitals, doctors, some nurses, medical equipment manufacturers, pharmaceutical companies, etc. Oh, and since Latinos tend to have better health than average, the ACA also takes from Latinos, who are also poorer than average. Made poorer still by this incompetent, biassed tax.
obamacare outsourcing 2015
written by costa rica's call center, July 11, 2013 5:03
Will the delayed start date of OBAMACARE affect the US unemployment rate? The U.S. healthcare reform (“Obama Care” or the “Patient Protection and Affordable Care Act”) is intended to pressure large and small employers through force and taxation. Enacted in July 2010, the end result will show North American companies deciding to send customer support, sales, lead generation and appointment setting jobs offshore to stay competitive or risk going out of business. Many business owners will hire a dedicated bilingual employee nearshore who is 100% qualified for their project. Financially speaking, ESL call center employees in Costa Rica are as effective as transitional in-house staff for half of the cost. This proven strategy will give small to medium sized companies the option to scale up their BPO staff without getting caught in the Obamacare challenge in 2015.


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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.