Many health-policy analysts, lulled into complacency by the fact that employer-based health benefits have not vanished in a puff of smoke in Obamacare’s first year, insist that the federal healthcare takeover is not to blame for the continuing poor recovery in employment. Their arguments are superficially appealing, but they ignore the big picture.
Compared to a normal economic recovery, the current one is characterized by too many part-time workers who are unable to increase their hours. A new report published in September by the Urban Institute and Robert Wood Johnson Foundation asserts that Obamacare does not explain the part-timers’ predicament. It focuses on two observations.
First, it notes that the increase in part-time work is fully attributable to an increase in involuntary part-time work. Perhaps we should celebrate this conclusion from Obamacare’s supporters. Previously, some cheered the theory that Obamacare, which expands Medicaid eligibility and heavily subsidizes health insurance for middle-income households, would lead people to voluntarily reduce their working hours. In 2010, then House Speaker Nancy Pelosi encouraged people who wanted to be musicians, for example, to quit their jobs and focus on their (as yet undiscovered) talents, because taxpayers would underwrite their health coverage.
(The Congressional Budget Office endorsed this approach last February, in a report that concluded the Obamacare insurance subsidies would “effectively boost the income of recipients, which will lead some of them to decide they can work less and still maintain or improve their standard of living.”)
If the predicted blossoming of art and music is not happening, and people are showing they would rather try to earn higher incomes than indulge their muse, this is a testament to the American people’s work ethic. Their choice, however, does not excuse Obamacare for making employers reluctant to offer more work.
Second, the September study notes that workers who toil fewer than 30 hours per week are not covered by Obamacare’s employer mandate. However, part-timers who work more than 30 hours are suffering the same as those who work less. This leads the study’s authors to conclude that Obamacare cannot be causing the slowdown.
It’s important to recognize that the cost of Obamacare goes way beyond the employer mandate. Indeed, the current employment data are largely irrelevant to the debate over labor-market effects because the employer mandate has been delayed (although there is a “look-back” period that might have some impact). Even if the employer mandate had been imposed on schedule this year, employers look at health benefits as one piece of compensation. They would be free to fund the mandatory health coverage by cutting back their workers’ hours. I expect many to do precisely this in 2015, when the Department of Health and Human Services is expected to impose the employer mandate.
The Urban Institute and Robert Wood Johnson Foundation believe the terrible employment picture is not caused by Obamacare, “but more likely due to a slower than normal recovery.” However, Obamacare is hiding in plain sight as a cause of the slow recovery.
Employers themselves continue to tell us that they are cutting employment in response to Obamacare. In a survey of employers by the Federal Reserve Bank of New York, which asked specifically about the effects of Obamacare, 20 percent reported they expect to increase the proportion of part-time workers, but only 5 percent expected to hire relatively fewer part-timers. And about 22 percent plan to cut wages and benefits, but only 6 percent plan to increase them. With respect to benefits, 68 percent of business leaders plan to cut the range of services covered, or cut the size and breadth of their provider networks. Another survey conducted by the Philadelphia Fed reported similar results.
On Labor Day, the American Health Policy Institute, which is affiliated with large employers, published a report that identified rising employer-based health costs as a barrier to job growth: “Unfortunately,” the report stated, “the Health Care Employment Squeeze — the pressures health care imposes on both the supply and the demand for labor — is making it difficult to get the U.S. labor force participation rate back on track and in line with expected patterns of economic recovery.”
Some policy analysts who support Obamacare can happily torture the data until it confesses to Obamacare’s lack of harm. However, employers themselves are giving us a clear message: Obamacare is stifling their willingness to increase workers’ hours.
John R. Graham is Senior Fellow at The Independent Institute (www.independent.org), Oakland, CA and Senior Fellow at National Center for Policy Analysis.