Study: Economists Fear Obamacare Employment Effects


Because of the ambitions of the Affordable Care Act to extend coverage to nearly all uninsured Americans, the individual mandate is significantly more important than its complement — the employer mandate. The fact is that the system created by the health care reform, popularly known as Obamacare, will not work without the individual mandate; it requires that every American who can afford to do so must purchase an insurance policy so that individuals will be able to comparison-shop for health insurance policies in online marketplaces where their collective bargaining power will theoretically foster competition and drive down prices. But the employer mandate was designed to slow the break-up of employer-based insurance plans and the flow of tax credits, which will subsidize the purchase of coverage on the individual exchange.

Like the individual mandate, the employer mandate has received its share of criticism.

Many have made the argument that the Obamacare provision that requires businesses with 50 or more full-time employees provide those workers with a minimum level of health insurance coverage or face tax penalties will cause employers to shift employees’ schedules so that they will no longer be considered full time or layoff workers entirely. There is also the concern that employers will choose to hire more part-time workers rather than full-time workers.

“Well, if you don’t believe ObamaCare is the biggest job killer in the country, look to the facts,” argued Republican Senator Ted Cruz in his 21-hour speech on the Senate floor at the end of September. “This year report after report has rolled in about employers restricting work hours to less than 30 hours per week–the point where the mandate kicks in. The data also points to record-low workweeks in low-wage industries.”

The primary reason for employers to cut the hours of their employees is so that they are not eligible for employer-sponsored coverage is the added expense. “The ambiguity over the law’s actual impact on health care premiums imparts uncertainty over where true labor costs will be going,” Sean Snaith, director of the Institute for Economic Competitiveness at the University of Central Florida, told CNNMoney at the end of September. “It is understandable that businesses would choose to delay any hiring that is not absolutely essential rather than running into that fog.” Even though the employer mandate has been postponed until 2015, nine of fourteen economists polled by the publication responded that businesses are delaying hiring. A few of the economists even predicted the legislation would cost the economy around 10,000 jobs per month.

There is evidence to support the claim that the Affordable Care will modestly affect employment in the United States; anecdotal evidence has shown that small business owners are lowering workers’ hours to limit their labor costs. But the claim that the reform is a “job killer” is overblown.

It is important to remember that companies that do not provide insurance, and will be required to, probably employ around one percent of American workers. “You’ve got 5.7 million firms in the U.S.,” Mark Duggan, who served as the top health economist at White House’s Council of Economic Advisers from 2009 to 2010, told the Washington Post. “Only 210,000 have more than 50 employees. So 96 percent of firms aren’t affected. Then if you look among those firms with 50 or more employees, something on the order of 95 percent offer health insurance. So it’s basically 10,000 or so employers who have more than 50 employees and don’t offer coverage.” Furthermore, according to Moody’s chief economist Mark Zandi, “there is little evidence that fiscal austerity and Health Care Reform have had a significant impact on the job market.”

But there has been some impact. While a third-quarter survey conducted by the National Association for Business Economics shows that economic indicators “fall broadly in the middle of ranges observed in the current and in previous business cycle expansions,” the 60 business and industry economists polled did indicate that changes in employment reflect the “forthcoming Affordable Care Act provisions.” At 22 percent, the share of panelists expecting a negative impact on their firms’ employment in the next 12 months stemming from Obamacare far outweighed the 2 percent share expecting a positive impact. Their responses also suggested that employment was shifting moderately toward relatively more part-time and fewer full-time workers.

Twenty percent of economists monitoring the finance, insurance, and real estate industries said they believe firms in those sectors will add more employees as a result of the law. Comparatively, one-fifth of economists said the health care law already has had a negative effect on their firms’ employment over the past three months.

“The concern among some is that there is the potential for higher premiums and because of that rise in compensation costs there could be a drag on employment,” National Electrical Manufacturers Association economist Timothy Gill, who helped direct the survey, told The Wall Street Journal.

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