Congress based the Affordable Care Act reform in 2010 on a model that made a couple of key assumptions about employment. The White House projected rosy growth that would lead to job creation; and this rapid expansion would take place prior to Obamacare’s implementation, reducing the temporary costs of safety-net programs, including Medicaid.
The new employer mandate would then ensure that new and existing full-time workers would not require subsidies to purchase individual health-care plans in new state-based insurance exchanges, keeping costs and new tax revenue balanced to keep the ACA from becoming a deficit driver in its first decade.
Neither of these assumptions has panned out for President Obama and his health care plan, and a new study suggests that the latter will make it worse. Normally after a recession, the US economy sees a job rebound, with employment in inverse proportion to the recession. Not only has that not happened, in terms of workforce participation, employment has hit generational lows well after the recovery point of June 2009.
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Currently, the civilian workforce participation rate is 63.5 percent after dropping to 63.3 percent in three months ago, the lowest since May 1979. When the Great Recession ended in June 2009, the workforce participation rate was 65.7 percent, and by the time the ACA passed in March 2010 it was still 64.9 percent. It fell below 64 percent in January 2012 for the first time since January 1984, and it has barely budged from the bottom of the range in the seventeen months since.
That may surprise those who hear the monthly job-creation figures, but those raw numbers ignore the context of population growth. According to the Bureau of Labor Statistics’ Population Survey figures, the US economy has added 5.267 million jobs since the passage of the ACA – which sounds impressive, except that it took 39 months to add them. That comes to an average monthly growth of 135,700, in a country where we need to add 150,000 jobs to keep up with new eligible working-age adults in the population. We’re not quite treading water, let alone making up for the millions of jobs lost in the Great Recession.
Critics complain that stagnant job growth results from the extra cost to employment from Obamacare, while supporters of the ACA claim either that job growth isn’t a problem or that its lack is unrelated to the health-care reform. A new study, however, shows that there may be a direct and unanticipated impact on the jobs market when the bill’s mandate comes fully into force.
The National Bureau of Economic Research concluded that the creation of the individual mandate and its exchanges might prompt as many as 940,000 people to drop out of the workforce. They would quit their jobs because working for employer-provided benefits would no longer be necessary.
Yahoo’s Rick Newman noted that this has both positive and negative potential outcomes. It might push older workers to retire early before becoming eligible for Medicare and allow spouses providing second incomes to stay at home. Nancy Pelosi argued in the final days of the Obamacare debate that this would allow others to take more risks as entrepreneurs and artists.
However, that dumps nearly a million more workers into taxpayer-provided subsidies than initially estimated (with the rosier job-creation projections in mind as well). That means higher costs up front for Obamacare, and at the same time increased risk of even higher safety-net spending if the drop-outs cannot sustain themselves without a full-time job.
Newman points out that this study does not show that job destruction will take place from the exodus, but that a currently unemployed worker will replace each person who leaves a full-time permanent job. But will they?
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Mort Zuckerman, publisher of The Daily News, took a look at the jobs added most recently and discovered most of them are part time. Zuckerman notes that the US has added 753,000 jobs since the start of the year, according to the BLS’ Household survey, but that 557,000 of those have been part time. In the last month alone, the US economy lost 240,000 full-time jobs while adding 360,000 part-time jobs. The number of part-time jobs is now 28,059,000, three million more than at the start of the Great Recession.
“At this stage of an expansion you would expect the number of part-time jobs to be declining, as companies would be doing more full-time hiring,” Zuckerman wrote in The Wall Street Journal. “Not this time.” What makes this expansion different? The Journal answered that question in a separate report on the shift to part-time jobs, especially in the hospitality industry.
“The Affordable Care Act requires employers with 50 or more full-time equivalent workers to offer affordable insurance to employees working 30 or more hours a week or face fines.” The incentives set up by the ACA are pressing businesses to avoid opening full-time positions while encouraging them to offer fewer hours to workers as a way to avoid costs.
That has people like Jill Age working overtime. Virginia television station WVEC featured the vice-president of TFA Benefits in its report on the impact of Obamacare’s individual and employer mandates on Old Dominion businesses and job creation. TFA helps businesses work out health-care coverage to comply with the new law, even though the mandate got delayed a year by the White House.
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Age tells WVEC that means more part-time employees rather than full-time. An owner of a temp agency also tells the station that her business is booming, thanks to employers who want to avoid hiring anyone at all because of Obamacare. “It could really put some of those companies in a big financial situation that they can not afford to offer healthcare or pay the penalty."
Of course, this means that all of those jobs that used to employ full-time workers will now only employ part-timers or temps, neither of which employers will be forced to cover on their health-insurance benefit plans. Many of those jobs left by the exodus won’t be filled by a full-timer at all, which means taxpayer subsidies will have to go to not just those who are leaving those jobs, but also the people who do fractional work to replace them who will also have to buy insurance in the exchanges themselves.
The question this raises is why we are providing disincentives to full-time employment at a point where we’ve hit 35-year lows in workforce participation already. A one-year delay won’t convince these business owners to start hiring full-time employees who will cost them more money in 2015 instead of 2014.
The US desperately needs to restart its job-creation machine in order to put millions of sidelined workers back in the workforce, but Washington is instead making it more expensive to hire and making regulation and cost less predictable with its reactionary and arbitrary changes to statutory law. Congress and the White House need to shelve the ACA and come up with a plan that streamlines regulation and cost so that businesses can hire full time employees rather than part-time temps.
We’ll try to muddle through any resulting artist shortage as best we can.