Yes, Some Companies Are Cutting Hours In Response To ‘Obamacare’
On
Friday, I posted this chart, showing that nearly all the job growth since the
recession ended has been in full-time jobs. Part-time employment is pretty much
flat.
I wasn’t
trying to make a political point, but many readers saw one anyway.
Specifically, they saw it as a refutation of a frequent Republican talking point:
that the Affordable Care Act, or “Obamacare,” is killing full-time jobs because
it requires employers to offer health insurance to their full-time (but not
their part-time) workers.
The
reality, though, is a bit more complicated. Obamacare hasn’t led to a shift
from full-time employment to part-time. But the evidence suggests it has led
some employers to limit the hours of workers who were already part-time,
effectively giving a pay cut to some of the most vulnerable Americans.
For
those who haven’t been following this debate closely, here are the basics: The
2010 health law requires large employers to offer health insurance to anyone
working “full-time,” which the law defines as 30 hours a week. Republicans
argue that’s leading companies to cut workers’ hours in order to stay under the
threshold. On Thursday, as one of their first acts in the newly inaugurated
Congress, Republicans in the House voted to redefine “full-time” employment under
the law as 40 hours a week instead of 30. The bill now heads to the newly
Republican-controlled Senate. (The White House has said President Obama will
veto the bill if it gets that far.)
Democrats
— and even some Republicans — have argued that the bill
doesn’t make much sense. Far more Americans work 40 hours a week than 30, so
raising the bar would likely put more workers at risk of having their hours
cut.
But
set aside that debate and start with the basic factual question: Are
Republicans right that employers are capping workers’ hours to avoid offering
health insurance? The evidence suggests the answer is “yes,” although the
number of workers affected is fairly small.
To
figure this out, we can look at the Current Population Survey, the same monthly
survey that the Bureau of Labor Statistics uses to calculate the numbers in the
chart above. The BLS numbers, though, have two big problems if we’re interested
in the impact of the Affordable Care Act. First, the BLS draws the line for
“full-time” at 35 hours a week instead of 30. Second, the BLS is counting
workers, not jobs — so someone working two 20-hour-a-week jobs would be counted
as a full-time worker.
Fortunately,
the survey includes a question asking workers how many hours they spend at
their “main job.”1 That means we can look at whether there’s
been any shift in workers’ hours around the 30-hour threshold.
Sure
enough, there has been. As the chart below shows, the share of part-timers2 working just below 30 hours a week has
been rising for roughly the past two years, while the share working just over
30 hours has been falling. (The share working exactly 30 hours has risen a bit
too, but that’s harder to interpret since people who work 29 or 31 hours might
round to 30 when they answer the survey.3)
A
few notes about that chart. First, it shows only the people most likely to be
affected by the 30-hours threshold, those who work between 25 and 35 hours a
week. That excludes the vast majority of workers. About 80 percent of hourly
employees work at least 35 hours a week and the health law has had no
measurable impact on their working hours. That makes sense: Cutting back
workers from 40 hours to 29 would be highly disruptive for most businesses. And
in any case, most of them already get health insurance.4
Second,
even focusing just on the most affected workers, the impact has been small. In
2009, before the Affordable Care Act was passed, 9.7 percent of part-timers
worked between 25 hours and 29 hours and 7.7 percent worked between 31 and 34.
In 2013, those numbers were 11.1 percent and 6.6 percent, respectively.5
Third,
there’s no way to say for sure whether the shift is due to the Affordable Care
Act. It’s hard to disentangle the effects of the law from the effects of the
recession and economic recovery, for example. But the timing is suggestive: The
change in working hours appears to hit in the middle of 2013, as the major
components of the law were beginning to take effect.6
Other
evidence also supports the idea that at least some employers are capping
workers’ hours in response to the law. Average weekly hours are rising in the
economy as a whole, but are falling for workers in many of the sectors most
likely to be affected by the Affordable Care Act’s employer mandate —
industries with lots of low-wage, part-time workers who historically haven’t
been offered health insurance. There’s also ample anecdotal evidence: Jed
Graham at Investor’s Business Daily has been collecting examples of employers that say they’re
cutting workers’ hours because of the mandate.7 Overall, workers in low-wage sectors have
seen their hours cut significantly since the recession ended.8
Taken
together, the evidence suggests that the health law has likely led a few
hundred thousand workers to see their hours cut or capped. That’s small in the
context of an economy with 150 million workers. But it isn’t a minor issue for
those workers. Most of them are among the economy’s most vulnerable: low-wage,
part-time workers who likely have few other options.
The
health law may also be having a separate, more positive impact on working
hours: It may be allowing some people who want to work part-time to do so.
Before the law, the only way for most working-age Americans to get health
insurance was either to work a job that offered it (which usually meant working
full-time) or to have a spouse who did so. Now, the health care exchanges
created under the law have made insurance available outside of work, while
Medicaid eligibility has been expanded in many states. That means some people
who were working full-time only to qualify for benefits, such as parents or people
nearing retirement age, have the option of working part-time and getting
insurance through the exchanges or Medicaid.
The
Congressional Budget Office, in a report before the law had fully taken effect,
estimated that millions of
Americans would voluntarily shift to part-time status once they no longer
needed to work full-time to qualify for health benefits.9 It’s hard to know exactly how many have
already done so. But there has been a marked increase in recent months in the
number of people reporting they are working part-time by choice. It’s possible,
as liberal economist Dean Baker has
suggested, that this rise reflects the effect of the health law.
None of
this gets at the deeper question of whether the employer mandate, or the
Affordable Care Act more broadly, is good policy. Many of the low-wage workers
whose hours are getting cut are also getting access to health insurance for the
first time; whether that tradeoff is a good one depends heavily on an
individual’s circumstances. For the economy as a whole, meanwhile, the employer
mandate simply isn’t that big a deal; other elements of the law, especially the
“individual mandate” that requires most adults to have health insurance, are
much more significant. And to the extent the employer mandate does have
negative effects, it isn’t clear that raising the bar to 40 hours a week would
help; it might actually make the situation worse by encouraging employers to
cut the hours of the far larger group of Americans who work at least 40 hours a
week. But on the basic factual question, it does appear that some employers are
reining in workers’ hours to stay under the 30-hour cap.
Footnotes
