I talk a lot about how Obama’s new regulations are hurting employment and growth. In my opinion economists tend to overlook the problem because A) it’s impossible to quantify and B) it doesn’t fit standard macro paradigms they studied in grad school. Here is a compelling datapoint that shows why over-regulation matters and ends up hurting the purported beneficiaries. The Wall Street Journal ran a story titled, Health Law Spurs Shift in Hours: Some Low-Wage Employers Seek to Avoid Overhaul’s Insurance Requirements With More Part-timers.
Labor-intensive service companies such as restaurant chains and hotel chains have to provide health insurance to “full time employees,” defined as those who work at least 30 hours a week. And not just any health insurance – the expensive “soup-to-nuts” plan mandated by Obamacare. Solution: limit employees to less than 30 hours per week. This is terrible for workers; they don’t get health coverage and now will have to commute between two jobs to get enough hours of work. This hurts U.S. productivity by wasting time and energy spent commuting between jobs.
This is a great way to keep the poor in poverty. Many of these folks are in low-paid jobs but fairly stable jobs that, however, provide some upward mobility to mid-level managerial positions. The perverse effects of Obamacare will make it tougher for them to climb the occupational ladder. We are talking about a big slice of the labor force; according to the BLS, “Retail Trade” plus “Accommodations and Food Service” equal 23.8% of the private labor force.
In addition to prompting large employers to cut the number of full-time workers, Obamacare encourages small businesses to stay small, because it only applies to companies with over fifty workers. So thousands of employers will figure out a way to stay “under the limit.” A few years from now, there will be a lot more companies with 45-50 workers than 51-55 workers. I understand this pattern already exists in Europe with similarly ill-conceived laws.
