Will ObamaCare Discourage Employers From Hiring?


Politicians love branding legislation as either job killing or job creating, but the empirical data underlying these claims is usually pretty murky. Just look at the 2009 stimulus package. The bill was pitched explicitly as a way to foster job creation. As part of the law, the federal government set up an unusual tracking and reporting system that, for all its flaws, remains far more robust than the sort of employment-effects analysis that accompanies most legislation. Academics and independent analysts across the political spectrum conducted their own analysis of the law's job creation. And yet it remains practically impossible to pin down its overall effects on the hiring and employment within any reasonable range. 

The reports produced by the Congressional Budget Office do not actually track real-world job creation, but they do reflect much of the diversity of the economic models created by those studying the stimulus; CBO's models estimate that the stimulus created anywhere from 500,000 to 3.3 million jobs. A range of that size tells us more about the uncertainty of the estimates—and in turn about the larger uncertainty about the effectiveness of fiscal stimulus—than it does about the law's likely job creation.

Yet it would obviously be a mistake to say that just because it is difficult to quantify the job creation or destruction involved in a law, there is no effect at all. Specific claims about the precise employment effects of the 2010 health care overhaul, for example, are somewhat dicey at best . But as Manhattan Institute Senior Fellow and Former Labor Department Economist Diana Furchtgott-Roth argues, there's good reason to believe that it will discourage many employers from hiring:

The mandated $2,000 tax per worker in the new health care law, effective 2014 and levied on employers who do not provide the right kind of health insurance, is discouraging hiring. The Patient Protection and Affordable Care Act of 2010 will raise the cost of employment when fully implemented in 2014. Companies with 50 or more workers will be required to offer a generous health insurance package, with no lifetime caps and no copayments for routine visits, or pay an annual penalty of $2,000 for each full-time worker. Moving from 49 to 50 workers will cost a firm $40,000 a year.

…The $2,000 per worker penalty raises significantly the cost of employing full-time workers, especially low-skill workers, because the penalty is a higher proportion of their compensation than for high-skill workers, and employers cannot take the penalty out of employee compensation packages.

Suppose that a firm with 49 employees does not provide health benefits. Hiring one more worker will trigger a penalty of $2,000 per worker multiplied by the entire workforce, after subtracting the statutory exemption for the first 30 workers. In this case the tax would be $40,000, or $2,000 times 20 (50 minus 30). Indeed, a firm in this situation might have a strong incentive not to hire a 50th worker, or to pay him off the books, thereby violating the law.

In addition, if an employer offers insurance, but an employee qualifies for subsidies under the new health care exchanges because the insurance premium exceeds 9.5 percent of his income, his employer pays a penalty of $3,000 per worker. This combination of penalties gives a business a powerful incentive to downsize, replace full-time employees with part-timers, and contract out work to other firms or individuals.

Is it possible to determine with any certainty how many jobs won't be created as a result of ObamaCare? Probably not. The Congressional Budget Office has estimated that the law will reduce employment by roughly 800,000 jobs over the next decade, primarily as a result of individuals choosing not to work in order to maintain health insurance. I wouldn't bet too much on the precise numbers. But it seems reasonable to believe that many employers will respond to the law's disincentives to hiring full-time workers.  

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  1. One thing I have noticed in my job search is that there are a lot of companies hiring people as "independent contractors" despite asking them to work full-time onsite jobs.

    Dunno if it's related. Just saying.

    1. Well, the escort industry has traditionally operated that way, Hugh. You can't really use the fact that you work in the world's oldest profession as an example.

      1. When most of your clientele is either really old or really, really fat, liability insurance premiums are ridiculous. It would be nice for employer to cover at least that expense.

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    3. The IRS has been trying its damndest to stamp out independent contracting, but Obamacare will make that impossible. 1099 workers will be the rule.

  2. Let me be clear. I don't give a fuck.

  3. If your company has mostly skilled workers, I don't see where this will be a big disincentive. But if you run a small warehouse, for example, and have a bunch of low skilled workers, it's going to look pretty attractive to sub-contract a lot of work or automate whatever you can. The upshot will be that the unskilled (i.e. poor) will, as usual, get the deepest part of the shaft. Thanks, Obama!

    1. Don't worry. It will provide jobs for lots of NY Times and WaPo reporters to decry the widening income disparties between the skilled and unskilled and the loss of good manufacturing jobs.

  4. United States Virgin Islands Republican caucuses, 2012
    Candidate Votes Percentage Unbound Delegates Delegates
    Ron Paul 112[3] 29.2% 1 1
    Mitt Romney 101 26.3% 6 7
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    1. This made sense on the atoll thread...not so much here.

      Find the next Ron Paul thread to repost.

    2. fucking hell. god shit dicks cunt mouth go. why are u posting this again and again and again and again and again and again and again?

      1. Just wait til Max comes along. He posts the same shit again and again and... well, you get the picture.

  5. Moving from 49 to 50 workers will cost a firm $40,000 a year.

    Subsidiaries. Lots and lots of 49-employee subsidiaries.

    disclaimer: I'm a business-moron.

  6. Anytime you increase the cost of employment, you suppress hiring. Duh.

    Now, exactly how much? Hard to figure.

    But every new law that increases costs, costs us jobs. Every. Single. One.

    1. Fortunately, with all the job-creating subsidies, bailouts, QEs, etc. it all balances out. You just don't see it because Obama is playing 11-dimensional chess.

      1. You have adequately described my 11 dimensional plan. You may continue to exist....for now!

    2. Obama care is worse than a simple increase in costs. It is an unknown and largely unknowable increase. Who the fuck knows how much this thing will ultimately cost? What kind of business can hire people without being able to calculate the cost?

      1. "What kind of business can hire people without being able to calculate the cost?"

        Those with a cost-plus government contract?

    3. R C, havent you heard Obama telling people essentially that they have to hire because it is their civic duty or some such shit? I think the left really does believe that they can wish the world into the utopia they pine for.

  7. Mr. Suderman, here is my version of your essay;

    Will ObamaCare Discourage Employers From Hiring?


  8. I find that it is difficult to sustain my moral, aesthetic, & rational outrage at Obamacare. It's too exhausting to maintain for three plus years. Especially with the continued existence of the DEA & ONDCP comitting rampant puppy murder (and lets not forget veteran murder), while police are literally beating people to death on the street in my county (RIP Kelly Thomas).

    What I do know is that it won't cost me MY job. So the poors have voted themselves out of jobs w/ Obamacare and we the taxpayers will have to pay for it. Nothing too new there.

  9. To me, this is exactly analogous to a minimum wage increase. It makes perfect sense that it'll result in a decrease in employment, especially at the low end of the labor market. Higher wages means lower employment - it's econ 101.

    As an aside - I don't think you can call these minimum insurance plans generous (except in the sense that someone else has to pay for them). If it's like my HDHP (pre obamacare), you get preventative for free, but otherwise, all costs up to the first $5k or so are out of pocket. These minimum plans are entry level plans and aren't generous at all when it comes to benefits. Of course, they're better than nothing if something really catastrophic happens.

  10. This isn't a problem. Obamacare was only meant to be an interim solution. Obama, Pelosi et al always intended to move us toward 'single payer' healthcare. That Obamacare causes of lot of issues is not a bug - its a necessary feature to get to agree that single payer is the way to go.

  11. We'll just have to inflate our way out of this.

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