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Obamacare Incentivizes Part-Time Jobs

By Robert Book -

Since the election, several large employers – ranging from restaurants and fast-food establishments to colleges that rely on part-time instructors – with lots of part-time employees have announced plans to limit their employees to 25 hours per week in response to Obamacare. While they’ve taken a lot of criticism for doing this, it’s worth looking at why Obamacare incentivizes employers to do exactly what they’ve edone. In short, they are not taking advantage of a “loophole” — they are simply responding to the law’s requirements and its definition of a “full-time” employee.

The “Affordable Care Act” requires “large” employers – those with 50 or more full-time-equivalent employees – to either provide “qualified” health coverage for all of their full-time employees, or pay an annual penalty of $2,000 per full-time employee (after the first 30) if they don’t provide such coverage. If they do provide coverage but it’s not “affordable,” the penalty is $3,000 per employee who finds it “unaffordable” (with a cap at the penalty they’d pay for not offering coverage at all).

“Full-time” is defined as 30 hours or more per week, or 120 hours or more per month. (“Affordable” is defined as less than 9.5% of the employee’s family income.)

The penalty is assessed on a monthly basis. In other words, if an employee works 121 hours in a given calendar month, that 121st hour costs the employer $166.67 (one-twelfth of $2,000), in addition to the employee’s pay for that hour and the payroll tax on that amount. That’s a hefty charge, and it’s much more than the hourly rate typical for part-time employment in most industries.

If the employer decided to let the employees work more than 30 hours (and pay the penalty), the money to pay the penalty would have to come from somewhere. It could come from reduced profits, higher prices – or lower pay for workers. Many business run at very slim profit margins, so it’s unlikely that they could take the entire hit to their profit and stay in business. Business‘ ability to raise prices is limited by customers’ willingness to pay. Chances are, employees would have to absorb some of the penalty – perhaps most of it – in the form of lower wages.

To get an idea of the effect on workers, consider that for an employee who works 30 hours a week, a business would have to cuts wages by $1.30 per hour to make up for the entire penalty. At 40 hours a week, the penalty would be a bit less – $0.97 per hour. These are not trivial amounts for workers in low-wage industries like food service, retail, and low-skilled labor.

For workers making at or near the minimum wage, there is even less flexibility. The wage cannot be reduced, so the employer’s only option is the reduce work hours to avoid having to pay the penalty.

Ironically, if enough businesses hire, say, two 20-hour workers instead of one 40-hour worker, there could be an apparent improvement in the unemployment figures. The unemployment data counts a person as “employed” if they worked at least ONE hour in the reporting period. By switching from full-time workers to a larger number of part-time workers, it would make it appear that unemployment dropped — even though the total amount paid to workers remained unchanged.

Comments (30)

  1. joe says:

    We as TAX paying citizens should start a movement such as the Tea Party movement to force the upper level leaders of this country to use the same health care and same retirement as we as citizens use. WHAT DO YOU THINK THIS WOULD DO TO EITHER IMPROVE OUR HEALTH AND RETIREMENT BENEFITS OR PUTTING REPRESENTATIVES WHO ARE INTERESTED IN HOW WE CAN IMPROVE OUR COUNTRY!

    By the way we don’t have and anarchy in our country. OR DO WE?

  2. Dr. Allan says:

    The paradigm is wrong. ALL health insurance should disappear. Let me say again, there should be no health care insurance. As a doctor, I receive on average about 50% of what I bill. That means that if I have an overhead (rent, salaries, supplies, etc.) of $20K/month, then I must bill $40K per month. So if I knew I would receive $20K, I could and would literally cut my fees in half. If the system simply did away with all insurance models, then the market would adjust itself to make health care affordable. The cost of an office visit would be $30 and labs would be $15 and all other fees, drugs included, would be in fractions. This includes surgeries. There are no doctors or facilities that will close their doors because they don’t have to charge double to collect 50% AND keep the government off their backs. Health care would excel once again.

    • PaulE says:

      Your suggestion would benefit both patient and physician. I like it! However, the one group it would NOT benefit would be the political class and all those that support their agenda. You know, those wonderful folks who dwell in Washington and pretend to be experts in all things, when in reality they lack the knowledge to understand most of what they seek to control. They like to “run things” and “tinker” with things they have no experience in or practical knowledge of, so they can “reform” them in ways that give them the power to decide who shall receive a service or product and how it shall be delivered. It makes them feel important and helps them to justify their taxpayer financed salaries and benefits.

      Your solution completely eliminates them from the picture. They can’t have that. If you start demonstrating that one area of the economy can function well with far less government intrusion, people might actually begin to get the idea that maybe other areas of the economy would also benefit from a similar course of action. Pretty soon we might end up with vibrate economy that was producing millions of jobs and people looking forward to a bright future, instead of what we have now.

  3. Ron B says:

    A DESIGN to create more takers, As employers move their workers to part time, more takers are produced, thus creating future voters to keep them in power. This law isn’t abought providing “Health Care”, its about power.

  4. Phil says:

    I am sadden to say we have lost this great nation of ours. This Presidential election clearly illustrates how the country is now divided with the majority leaning heavily toward liberalism (Fascism). Our country will never be the same again. Only GOD can fix this mess!

  5. Marilyn says:

    I was so disappointed and sad when supposedly smart Americans voted BO for another four years. Unbelievable. I have a feeling those of us who didn’t vote for him will be paying in more ways than one. America as we have known it since 1776 will be slipping away into who knows what. I worry and feel so sad for our children, grandchildren and great grandchildren.

  6. ANTHONY says:

    ALL YOU IGNORANT MORONS THAT PUT THIS GUY IN OFFICE EVIDENTLY DID NOT DO YOUR HOMEWORK BEFORE YOU VOTED. JUST WAIT THERES MORE TO COME, HOLD ON TO YOUR BANK ACCOUNTS

  7. Ruth says:

    One of the great problems is that those who voted for this mess never read the law or else figured it was just propaganda.
    They heard “Medical Care for Everyone” and didn’t stop to think about how that was going to happen. Don’t expect BO or anyone in Government to take responsibility to make it work. They will just press harder on the people.

  8. PaulE says:

    When the electorate decided to give Obama four more years, they sealed the fate of the nation. We are now guaranteed to follow the exact same path that led to the economic collapse of so much of southern Europe. ObamaCare is just one of many such restructurings of the nation’s economic landscape, that will permanently alter our society in ways few have imagined.

  9. MEJ says:

    I am lucky that I worked 35 years and received a pension. All the major expenses are paid every month, but no funds left over for emergencies. I could not afford to keep former employer’s health insurance. I have ‘wellness insurance’ I pay for. I am allowed 4 “sick” visits and 1 wellness annual physical exam. Hope I don’t get injured or get serious ill as there is only 1 hospital visit insurance will pay for. At 58 I am trying to find another job (either part-time or full time), but as a ‘retired’ office worker with very good computer skills, common sense, attitude and aptitude to learn new skills… my resumes go unanswered. I can see where the government will askew unemployment numbers when employers hire 2 part-timers for 1 full time position.

  10. Florence says:

    Obama & his obamacare have already created too much hardship for Americans. Some doctors stopped accepting Medicare this past summer, making patients fully responsible for their fees. People do not have jobs, they cannot go to their doctors. Now small businesses feel compelled to give only part-time hours therefore lower income. After all, while G Bush was in office big businesses left this country and continue to do so under BO. The shame of all of this is that the govt knew this and did absolutely nothing to protect workers re: healthcare, pensions and loss of salaries.

    I cannot believe that BO is the media darling. The govt is obama, so numbers can be skewed to benefit his majesty.

    govt workers and politicians should have the same insurance as we have. The fact that politicians have much better coverage says they are “entitled.” They also do not pay taxes on all of their income. I forget what is exempt, I read it in my Govt. Book.

    If you are an American, you are on your own! If you are illegal, the govt will ensure your every need will be met gratis American taxpayers. No insurance problem at all for for illegals!

    Obama and all of his actions have made a worse mess of this country. This is going to be a long 4 yrs. How about 3 yr terms for the presidency and once that term is over, the policies in place should end; Can only serve 1 term for any political office. And, if one has been in any political office, that person should never be allowed to be in any branch of fed, state or local politics ever again.

  11. cs says:

    What a shame people wanted change they got it no winning allowed action is what we need is action. Abolish Obamacare nowit is going to hurt our country very badlet’s keep in prayerno matter what God is in control.

    • jana says:

      this makes no sense. and god did not help us fire obama.

      • Robert Johnson says:

        God kindly says we created this mess by electing sorry politicians that promised everything to the “less well off” for their vote, and he is also saying clean it up yourselves. Stand up as a people and say NO MORE, But unfortunately there are too many on the government dole too lazy to support themselves for that to happen, so what will happen is that we will follow that long used path described by historians away from freedom into slavery, and a thousand years from now, some pundit will wonder why we choose the path we did.

  12. James in Ohio says:

    Lest I be misunderstood, let me state up front that I am (of course) totally opposed to ObamaCare (as well all other forms of Socialist programs). That said, thinking about how to deal with the hand we have been dealt, is there anything stopping an employee whose hours have been cut from working (for example) up to twenty-nine-hours a week at McDonald’s and another twenty-nine-hours a week at WalMart? I understand that such a worker would be left without health insurance but they would have the equivalent income of a forty-hour plus work week. I’m sure there is some problem with my reasoning here. Otherwise, I would have heard about it in the media by now.

    • PaulE says:

      You are correct. The employee could have the income to purchase his own healthcare insurance doing as you suggest. The biggest issue that person face is the cost of privately purchased health insurance is quite expensive given the way the government has laid out incentives in the insurance marketplace. In reality, I would expect the person would be working solely to pay for his private health insurance if his income was from jobs at either McDonald’s or Wal-Mart.

  13. JLM says:

    It is hard to beat Santa Claus!

  14. JLM says:

    Jan 1st I lose my paid health care and go from salary to hourly thanks to obamacare. I’m 72 but still have to work so will have medicare and am looking for medigap insurance. Hopefully my drs will continue taking medicare. It is time all gov’t workers and politicians have to participate in the same health care programs “we the people” have to. Also no more for life pension plans after serving one term. Let them work for a living like the rest of us. Time for them to take a pay cut when we do. We didn’t vote all the raises for them…they did!

    • PaulE says:

      JLM, your last sentence sums up why none of your proposed changes will ever occur. As long as they have to vote to limit themselves to term limits or modify their existing pension plans or health plans, nothing will happen. When is the last time you heard of anyone voting to give themselves a pay cut or reduce their benefits? The politicians in Washington are no different. As long as we keep sending the same people back every 2,4,6 years like clock work, nothing will change. The American people had the last opportunity to stop ObamaCare before it went into effect last November and they blew it. Now there is NO WAY to stop implementation.

    • Robert Johnson says:

      The elected officials all seem to believe that they were not elected to represent us, but to take care of us, and that makes them think that they are elite and not subject to the same laws they impose upon society. I am not really an anarchist, but massive government sure pushes me that way, too many people trying to impose their will upon me, and I do not like it.

  15. DaveP326 says:

    The Affordable Care Act is neither. It’s not affordable and the level of care is at rock bottom. For a country like the USA, it’s embarassingly primitive. If you happen to be a senior citizen, you have BIG trouble. Bureaucrats weill be making decisions as to what level of care you get, what typrs of treatments they will pay for and they will make the decision as to when to terminate medical care; that is, when to stop “treating” you to cure your condition, and just dope you up with pain killers to keep you comfortable while you die. Is this a great country or what? I never thought I would ever see this day! When a country re-elects a bum like Obama, it doesn’t deserve to survive.

    • PaulE says:

      I agree. I never thought I would see the day when the country voted to destroy itself, but that’s what happened on November 6th. Now we get to live through the consequences of that incredible mistake.

  16. Arthur says:

    The government has a very poor track record running any operation from the US Post Office to the IRS attempt to sell alcohol and sex at the Mustang Ranch in Nevada before going bankrupt. Why does anyone trust or believe the government is going to make Health Care right?

  17. Carole says:

    Am I the only one who wonders why in the world there isn’t affordable health insurance? I’m continually amazed at the outrageous costs for routine medical procedures ($3-5K for a colonoscopy). The doctors and nurses are not getting rich. Has anyone done a good audit of the medical insurance industry and the built in incentive for hospitals and doctors to overcharge?

    The entire article never looks at the entire problem. Is it really OK for large employers to have low cost workers who can’t afford health insurance? REALLY???

    • John says:

      Medical care costs are probable one of the most highly audited areas in our entire economy. Part of the high cost of medical care is all of the hidden fingers in every aspect of it. Guess what, the auditing of those costs, by insurance companies and the government, just adds more to the cost (one of the hidden fingers). Other hidden fingers are the various liability insurance costs (this one is huge), government oversight and monitoring costs. Patient medical insurance costs is another big one. So yes, when you go in for that routine colonoscopy, you are paying not only for the various people directly involved, but all of the lawyers, insurance companies, government, and all of the people that have to fill out all of the various forms for the money to flow to all of the various people and fill out the audit paperwork. Oh, and each one of those fingers is looking not only for enough money to cover their costs, but hope to make some profit.

      The article does sort of cover the financial aspect of the health insurance. Whether it is a large, or a small employer, they have to set prices to compete the market, then they have to manage their costs that allows them to be successful. Depending upon the type of business that you are in, it can easily result what this article talks about. Just about any retail business is likely to see this.

  18. Rick says:

    Medicare forces people to emergency rooms also. Unless one buys a fairly expensive supplement, virtually all care when you are away from your home state must be through an emergency room. And who doesn’t travel out of state or out of your coverage are now and then?

  19. Chris Sinclair says:

    This law is going to reduce people’s pay through reduced work hours and ultimately increase the number of people using the emergency room for non-emergencies because they lack health insurance. And to think that one of the goals was to get people out of the habit of using the emergency room.

  20. Wan says:

    Figures don’t lie, but liars figure
    Has never been trues than when you talk about our Politicians.
    We really do need term limitation to remove and prevent corruption in our government.

  21. Cliff says:

    There has to be a way that the gov’t must show the dif. between full and part time employment

  22. Mari says:

    I find it so interesting how the government can skew the numbers to benefit 0bama. If a person works even one hour its considered employment? Hard to believe that would even count!

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