The Obama administration announced last week another one-year delay of the Affordable Care Act’s employer mandate for some firms. This comes on the heels of the Congressional Budget Office’s “The Budget and Economic Outlook: 2014 to 2024,” which contains the now infamous analysis that the ACA will reduce work by a full-time equivalent of 2.5 million jobs by 2024. There is, however, mounting evidence that employers already have been cutting employees’ hours in the low-wage employment sectors. This trend has been observed in Illinois, and among the very populations that can least afford to bear these cuts, which is why the partial delay is welcome news in the president’s home state.
In Illinois, three employment sectors fall into both the lowest-paid and lowest work hours categories: retail trade, food and beverage, and general merchandise. They comprise about one-fifth of the state’s total employment. Of these three sectors, all three have average work hours of less than 30 hours per week. The law’s threshold for full-time is 30 hours.
Between 2011 and 2013, Illinois has lost the equivalent of about 63,000 jobs in these sectors through reduced work hours. That is close to the total number of jobs added in all sectors in the state during the past year.
It is important to note that, before ObamaCare was passed, the average work hours remained steady for these sectors in Illinois, even in the aftermath of the financial crisis. In fact, average work hours increased slightly in two of these sectors between 2008 and 2010. But all three sectors saw dramatic reductions in average work hours after ObamaCare was enacted.
Illinois is far from a unique example. This disturbing trend is becoming more apparent nationally, as well.
Retail employment, which makes up almost one-tenth of the nation’s total nonfarm employment, is seeing similar reductions. In 12 of the 14 states including Illinois where average weekly hours worked are available, non-supervisor workers in the retail trade showed average annual declines in hours worked between 2011 and 2013. In fact, six states saw average hours worked fall to 30 hours or below for that sector. One state had no change in hours and one saw an increase.
Taken together, these states represent one-quarter of the nation’s retail sector. While some of these states did see employment gains, the net loss of equivalent jobs was about 1 percent of the sector’s total employment. While it is difficult to determine the many factors that might be affecting the almost across-the-board cuts in work hours, it is unusual to observe employment growth with a simultaneous reduction in hours.
Thirteen of these states grew in overall retail sector employment during this time period. Why might employers be cutting work hours?
Under the law’s employer mandate, employers with 50 or more full-time employees or full-time equivalents are required to offer “qualified and affordable” health insurance coverage to their employees. This provision of the law was supposed to go into effect Jan. 1, 2014, but was delayed this past summer for one year by the Obama administration and was recently delayed again for another year for those employers with 50-99 full-time or full-time equivalent employees.
The CBO report states that: “there have been anecdotal reports of firms responding to the employer penalty by limiting workers’ hours … In any event, because the employer penalty will not take effect until 2015, the current lack of direct evidence may not be very informative about the ultimate effects of the ACA.” The employer penalty now will not take effect until 2016 for many employers, yet we seem to have amassed a mountain of anecdotes.
At some point these many anecdotes will turn into evidence. The Federal Reserve Bank’s “Beige Book” includes comments from businesses in all 12 of the Federal Reserve Bank districts. The document, issued eight times annually, summarizes comments from businesses. While it does not reflect the Federal Reserve’s official view, it does provide insights into economic conditions across the nation. Business contacts, economists and analysts frequently cite the ACA as having a dampening impact on business hiring, spending and overall uncertainty.
The rollout of the president’s signature legislation has been a calamity, as it further threatens the prospects of the lowest-wage workers in Illinois and across the country. One does not need another anecdote to understand that the further delay of the employer mandate provides a tacit admission of just how destructive the employer mandate likely will be. Rather than allowing the president to unilaterally delay this damaging provision until after the midterm elections, lawmakers should take a swift vote on ending both the employer and individual mandates.