Politics & Policy

Obamacare vs. Jobs

The law discourages the hiring of full-time employees.

Job seekers will soon have a harder time finding full-time work, thanks to Obamacare. As of 2014, the law will attempt to force employers to provide insurance — but in doing so, it will have the unintended effect of making part-time employees more desirable than full-timers.

That’s because if a business with more than 49 full-time employees fails to offer insurance coverage, it will be required to pay a fine. And the fine will apply starting not with the 50th employee, but with the 31st. At $2,000 per employee after the first 30, these fines add up fast. A business that surpasses the threshold by just one full-time employee will face $40,000 each year in penalties.

Businesses that can easily substitute part-time for full-time labor — in particular restaurants, hotels, and retailers — will have a strong incentive to do so. The Wall Street Journal reports that Carl’s Jr., Hardee’s, Red Lobster, and Olive Garden are already planning to hire part-timers instead of full-timers at some or all of their locations. Other employers will restrict their current full-time employees to 30 hours a week so that they will be considered part-time under the law. And, of course, some businesses will opt to stay smaller. France provides an instructive example: There, 50 employees is the magic threshold for whether labor regulations apply. And — no surprise — the country “has more than 2.4 times as many firms with 49 employees as with 50,” Jed Graham notes in Investor’s Business Daily

#ad#All this is terrible news for an already bleak labor market. Congressional Budget Office director Doug Elmendorf has estimated that Obamacare as a whole will cost something like 800,000 jobs, and a CBO analysis noted the pressure that many companies will face to hire fewer full-time workers.

Young job seekers, already slammed by the bad economy, will be among the most harmed. Earlier this year, the Associated Press found that more than half of those under 25 with a bachelor’s degree were either jobless or underemployed. The Obamacare penalty will cut full-time jobs in some of the primary employment havens of struggling graduates.

Workers under 25 account for more than 28 percent of all retail workers, according to the National Retail Federation. And earlier this year, the Associated Press reported:

In the last year, [degree holders under 25] were more likely to be employed as waiters, waitresses, bartenders and food-service helpers than as engineers, physicists, chemists and mathematicians combined (100,000 versus 90,000). There were more working in office-related jobs such as receptionist or payroll clerk than in all computer professional jobs (163,000 versus 100,000). More also were employed as cashiers, retail clerks and customer representatives than engineers (125,000 versus 80,000).

But youngsters aren’t the only ones in trouble. Obamacare’s penalties will also be especially devastating in the service industry. Only 41.5 percent of employers in this industry provided insurance coverage last year. But these jobs have been another refuge in hard times; personal-service employment actually increased by 2 percent between 2007 and 2010.

It’s becoming increasingly clear that Obamacare will result in fewer full-time jobs for low-wage Americans. Wasn’t that precisely the demographic that Obamacare was supposed to help?

— Jillian Kay Melchior is a Thomas L. Rhodes Fellow for the Franklin Center for Government and Public Integrity. 

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