The WasteWatcher: The Staff Blog of Citizens Against Government Waste

IBD: ObamaCare DOES Cut Employees' Hours

The WasteWatcher is the staff blog of Citizens Against Government Waste (CAGW) and the Council for Citizens Against Government Waste (CCAGW). For questions, contact blog@cagw.org.


Investor’s Business Daily (IBD) took on the subject of whether or not the Affordable Care Act, better known as ObamaCare, has encouraged employers to reduce their employees’ working hours in order to avoid the law’s penalties.  According to an August 14 column by Jed Graham, the answer is yes and “there is no clearer test than the one put forth by the White House Council of Economic Advisers.”  That test computed the ratio of employees that work 31-34 hours per week with those that work 25-29 hours per week.  The Council released their study in early 2014 and found that, “There is no systematic evidence that employers are shifting employees to just below 30 hours per week.”  But Graham took their test using newer data and came up with different results that no doubt many employees are experiencing now.

As you may recall, ObamaCare mandates that employers with 50 or more full-time equivalent employees (those that work 30 hours or more) must provide health insurance or pay a penalty of $2,000 per employee.  This can be very damaging to companies that hire a lot of part-time workers, such as restaurants, supermarkets, and retail stores.  Ever since signed into law, the theory has been ObamaCare would cause employers to reduce the working hours of employees to get them below the 30 hour per week threshold in order to avoid the penalty.  In particular, part-time employees that normally work in a 31-34 hour per week window would more likely have their hours reduced than someone that normally works in a 25 to 29 hour window.  In other words, the closer a part-time employee got to 30-plus hours a week, the more likely that employee would have his or her hours reduced.

Graham looked at recent data from the Current Population Survey from the U.S. Census and the Bureau of Labor Statistics.  Graham wrote, “after leveling off for a couple of years as the economy recovered from the recession, the ratio [of persons working 31-34 hours per week to persons working 25-29 hours per week] began a sharp and sudden dive in 2013.  In June of this year, there were 191,000 fewer workers with usual work schedules of 31 to 34 hours in their main jobs than at the end of 2012, a drop of 8 %.”


Investors Business Daily Graph 8-14-2015
Graham also noted that an additional 406,000 people were working in the 25-29 hours per week, a 12 percent increase.

Graham is critical of other studies (Urban Institute and AEI/George Mason University)  that have said there has been no cut in work hours as a result of ObamaCare because the studies either focus on the industry and not the occupations within a particular industry, or the studies have not taken into consideration the timing of the data.

For example, IBD’s has been cataloging a list of employers that plan to reduce the hours their employees work as a result of ObamaCare’s employer mandate.  Currently, the list stands at 450 employers and more than 100 of them are school districts, local governments, and colleges.  Any cut in the hours of part-time employees, such as cafeteria workers or bus drivers, within industries dominated by well-paid full-time employees, such as the public institutions listed above, will be hidden.  Therefore, Graham advocates looking at specific occupations within industries for changes in working hours.

Timing is another important consideration because President Obama delayed the mandate for employers in early 2014.  For employers with 100 or more employees, their mandate was delayed until this year and furthermore, they only have to cover 70 percent of their employees, as opposed to 95 percent as the law requires.  (They will have to cover 95 percent in 2016.)  Employers that hire 50 to 99 employees have had their mandate delayed until 2016.  These delays were put into place to avoid a voter backlash in the 2014 elections following the disastrous roll-out of the healthcare law.  (Which came anyway, by-the-way.  Republicans took the U.S. Senate and gained seats in the House of Representatives, as well as in state legislatures.)

Looking at the chart above, there was a sharp drop in workers’ hours the as the end of 2013 approached and the employer mandates were scheduled to take hold in 2014.  But when the mandate was put on hold in early 2014, the hours went back up.  However, now that some employers are dealing with the 2015-delay expiring and others are preparing for the 2016-delay to expire, the weekly working hours are dropping again for part-time employees.

Graham raises concerns that would eventually face all employers as time goes on and if ObamaCare should not be repealed.  What will employers do when the employer penalty amounts will increase by the same percentage as health insurance premiums?  Many healthcare policy experts believe we will see employers cut back on their number of employees, leading to job stagnation and higher unemployment rates, similar to what other countries contend with because of their numerous and expensive social welfare programs, including "free" government-run healthcare.

Meanwhile, it will be interesting to see what employers do in 2016.  Expect to see further erosion of part-time workers’ hours as the employer mandates and penalties officially take hold.  That might change however, if President Obama illegally delays the employer mandate again.  After all, it is a presidential election year.

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