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Obamacare, the employer mandate, and the rise of part-time America

July 16, 2013
Tuesday, July 16, 2013

Another look at Obamacare, the employer mandate, and the rise of part-time America

Credit: Goldman Sachs, AEI

Credit: Goldman Sachs, AEI

Goldman Sachs has some thoughts on the implementation delay of Obamacare’s employer mandate — and whether the health care reform law has been nudging employers to hire part time rather than full time:

The delay should have modest near-term labor market implications. Some employers have indicated that they either have or will shift to more part-time workers in response to the health law. If this were occurring, it would have a positive effect on payrolls (assuming one full-time job is replaced with multiple part-time jobs) but would show up as a greater number of part-time workers in the household survey. This is to some degree what we have seen in recent employment reports, where part-time workers as a share of the population have risen since the start of the year, while full-time employment has been essentially flat.

The reference period for determining full-time employment is determined by the individual employer so the timing will vary, but to meet federal requirements it is likely that most employers would need to start their reference period in Q3 if they had not already.

While it is possible that the trends over the last few months might reflect the approaching onset of the now-delayed employer mandate, it is also important to note that the shift toward part-time labor pre-dates enactment of the health law and is much more clearly associated with the economic downturn, as shown in Exhibit 1.

When I look at the GS chart what I see is a) a surge in the share of part-time jobs as the Great Recession and Financial Crisis hits, b) another pop as the recovery begins to more firmly take hold in 2012 — which makes sense since employers are seeing better demand but are still cautious about hiring — followed by c) another surge more recently. Perhaps it is that 2013 upturn that reflects the Obamacare impact. I think Goldman is more cautious in declaring part-time America than what the evidence suggests.

Then you have pretty compelling anecdotal evidence, which GS also refers to, such as this recent piece from CNN Money:

Delaying the Obamacare employer mandate has simply put off rules business had already started adjusting to.

Under the Affordable Care Act, companies with 50-plus full-time employees must start offering them health insurance or face stiff penalties. The employer mandate had been set to kick in January 2014, but was pushed back a year.

Because a 30-hour work week counts as full-time under Obamacare, Fatburger fast-food restaurants had started cutting worker hours below that threshold, CEO Andy Wiederhorn said.

Some Fatburger owners even began “job sharing” with other businesses, teaming up to share a higher number of employees all working fewer hours. Someone could work 25 hours at one Fatburger, 25 at another one with a different franchise owner, and still not be a full-time worker under Obamacare rules.

Many companies at the International Franchise Expo in New York City last month acknowledged they’ve been adopting that slash-and-share method, cutting hours and splitting workers.

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