The dominoes have been falling since the passage of Obamacare. Acknowledging impending chaos in both the “health care exchanges” and the labor market, the President decided to delay enforcement on businesses until 2015. When asked about business compliance problems, a White House spokesman simply stated, “they’ll adjust.” I agree, but I’m sure my idea of adjustment is different from that of the administration.
Obamacare requires employers with the equivalent of 50 or more full-time workers to offer health insurance to employees working 30 or more hours, or pay a fine. The average annual premium for employer-sponsored plans in 2012 was $5615 (see http://kff.org/report-section/ehbs-2012-section-1/). Employers that do not offer acceptable plans must pay a fine of $2,000 per worker in excess of 30. For example, a firm with 55 employees would pay $50,000 ($2,000 x 25 employees in excess of 30).
Although large firms hire the most workers in the U.S., the vast majority of employers are small businesses. Those below or close to the 50-worker threshold will have a sizeable incentive to stay under it by outsourcing some of their work, splitting their businesses into smaller entities, or foregoing growth opportunities altogether. None of these options is good for the economy.
Medium-sized and large firms cannot realistically downsize to below 50 full-time equivalent employees, but they can shift to hiring more part-time workers. Many already offer health insurance because it helps them attract and retain high quality employees. Some—particularly those that hire mostly low-skilled workers—don’t offer health benefits because they don’t have to. One option for these employers is to hire more part-timers (below 30 hours per week). Another option is to offer insurance or pay the fine, and adjust by hiring fewer workers and/or raising prices.
Put another way, a business hires a worker only when the value of the work he or she performs exceeds the additional wages, benefits, and other related costs. If hiring costs are increased for full-time workers, employers will cutback on workers, hire more part-timers, or raise prices to meet the new regulatory demands. Although it is difficult to forecast the numbers with precision, we know that employers will take action to minimize costs over the long run. The predictable result is some combination of fewer full-time employees and higher prices. Neither of these outcomes is good for the economy.
Obamacare has always been and will always be a wealth redistribution scheme. Government simply cannot cajole employees without repercussions; somebody has to pay the piper. The pushback we’re seeing now is only the tip of the iceberg, but have no fear. The left will promote more costly and ineffective regulations to “fix” these problems long enough to get through the next election cycle.
There are more problems ahead. Besides, what gives Obama the right to delay enforcement of a bill passed by Congress?
Health care is a benefit, just like vacation days, sick days and PAID maternity/paternity leave. The idea is so obvious in the rest of the world that nobody reflects on it. When the law will be enforced on businesses in 2015 and offering health care will become the norm, small businesses, which are not required to offer it, may find themselves having troubles to hire good employees. Good employees would most likely prefer to work for a bigger business that offers them this benefit. Small businesses may face tougher competition over employees.