As Obamacare Proves Expensive, Employers Trim Benefits To Cut Costs


Fast food restaurant

If you make it more expensive to employ people, say by mandating health coverage and also hiking the cost of that coverage with a giant government program we'll call "Obamacare," employers have a limited set of options: They can eat the cost, if they're lucky enough to have a healthy profit margin that can be partially sacrificed; they can find a way to employ fewer workers; or they can reduce the cost of the workers they have. All of the approaches are likely to be used to one extent or another. We already know that many companies are reducing workers' hours and turning to temp workers. And there's evidence of firms eliminating health coverage that's not required by law or else self-insuring if they employ disproportionately young and healthy workers. Now comes word that many firms are cutting the overall cost of worker benefits so that they can better shoulder the costs of Obamacare.

From Jed Graham at Investors Business Daily:

Employer spending on benefits rose at the slowest pace on record in the first quarter, as companies began bracing for higher health costs with next year's launch of ObamaCare.

Total benefits, such as insurance and pension contributions, rose just 0.1% vs. the end of last year, the smallest gain in Labor Department data going back to 2001. By comparison, payroll employment grew by a half-million, or 0.4%, in Q1. So benefits-per-worker declined.

Total employee benefits provided outside of government jobs declined outright.

The biggest impact, as you might expect, is among service sector jobs which don't generally draw high wages. Health coverage in this sector has traditionally been available, but limited to a level below that required under the Affordable Care Act. Reports IBD, "Total benefits in service occupations shrank 0.3% in Q1, the first decline in data going back to 2002."

Overall, the drop in benefit costs may reflect decreasing generosity in benefits, as well as a move toward part-time work that reduces the number of people eligible for benefit packages at all. Some companies, especially in the low-margin restaurant industry, have been very open about cutting worker hours, and Gallup reports that the proportion of the workforce in part-time jobs has risen to 20.6 percent.

There's also the growing shadow economy, in which an increasing number of people and businesses operate completely off the books, primarily to escape taxes and regulations, of which the Affordale Care Act is one (actually, it's a bunch).

Obamacare is looking more and more like an empty promise that will make many jobs much suckier than they need to be.

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  1. Action — Reaction.

    NO WAI!

  2. How does turning to temp workers avoid any of this collectivism? Most temp agencies employ hundreds of workers, which should require them to participate in this statist scheme and force them to charge their clients higher amounts for temps assigned. Am I missing a temp agency carve out in this fascist monstrosity?

    1. A lot of temps are 1099ed, which means their treated like contractors and they aren’t anyone’s employee. Which means that no one is required to provide them with health care.

      1. Okay, just from my and my wife’s personal experience, no we have never been 1099rs in a couple of years of temp agency work. Always 40+ hrs. per week too.

        I am sure in certain fields 1099s are common, but not in the most common fields like factory and office assignments.

      2. I don’t think they are “treated” like contractors – they are contractors, or freelancers. Same thing.

        It’s a real pain, because they don’t withhold your taxes from your paychecks. You have to pay them.

        This “shadow” economy existed well before O-care. I’ve worked a few jobs and got paid in cash. I would say that’s the norm in large parts of LA.

        You see, you can try to fight taxes and regulation by joining the tea party or waste your strength trying to influence policy, OR you can just not pay taxes. It’s easier to do the latter.

  3. Companies bring in temp workers on as as-needed basis. The temp agencies may still have to offer benefits (I think it depends on their relationships with the workers) but the overall effect is that of employing fewer people.

    1. Not the temp agencies around here. When they assign you, they pay you too. You are their employee working on assignment. Most of the factories in this area use one or more of them and the jobs are full time.

      I don’t see where this “overall effect” comes in, since AtWork, mForce, or whoever is still employing hundreds of full time workers and assigning them everywhere from call centers, to factories, to insurance offices.

      Sure, their clients might show fewer employees, but the bill from the temp agency for the supplied additional labor is still going to include the Obamacare tax.

      1. Perhaps the temp agency self-insures, or is able to negotiate less expensive employer sponsored coverage (mostly untouched by Obamacare) than a small firm can.

  4. I am confused. I thought Obamacare was supposed to make all of this free?

    I have it on good word from the dems that the companies cutting workers and benefits are just racists who are doing it to spite Obama. They are just sore losers.

    1. If you thought it was expensive before, just wait until free kicks in.

    2. Worse than racists, they are greedy hoarders too.

      1. Worse than plain racists….greedy cartoonish KFC colonel racists who just want the president to fail!

      2. Kulaks I tell ya! I’ll never forget the poli sci professor I had who defended the liquidation of the Kulaks because they had the audacity to shoot the Soviets who came to take their food.

        1. That is how Stalin got a bad name too. Families of people he had to eliminate complained about it for decades before anybody paid them any mind. All that hate built up and finally tarnished Stalin’s reputation beyond salvage.

    3. Just this morning, shriek was telling us that Obamacare won’t affect anyone because Popeye’s Chicken offers health insurance to its employees.

  5. Since temp workers generally don’t have set hours and the law refers to workers who work 35 hours or more per week, the temp agencies can probably skirt the law that way. The real answer is either make all low skilled workers part timers or decentralize operations so that no one corporate entity has more than 50 workers. LESS EFFICIENCY!! MORE PAPERWORK!! BUSINESS DECISIONS BASED ON NON-BUSINESS INCENTIVES!! BEST THING SINCE THE SOVIET UNION WENT BELLY UP!!

  6. Driving down the road the other day I saw a bumper sticker that said I heart obamacare, the driver of this 2001 corolla must be operating on pure blind faith in team blue because it seems to me even the best and brightest don’t fully understand the ramifications of the ACA,

    1. He probably can’t wait for ObamaCarCare too.

    2. I saw one of these stickers for the first time this morning. Upper west side, New York City, natch.

    3. Feel free to key the shit out of it if you can get away with it. People who don’t respect property rights don’t deserve to have theirs respected.

  7. The President promised that if I like my plan I can keep it and if I didn’t have access to health care I would get access to health care. Not once did he say anything about cutting benefits or raising costs. Who to trust, the twice-elected President of the United States or the managing editor of something called “Reason 24/7”?

    1. I think it’s pretty obvious ….not President Hollow Chocolate Bunny. Any other softball questions you want me to field?

      1. Hollow chocolate bunny. Holy shit.

        The king of the shitweasels has inspired more insulting nicknames than any president in history. Most of them are fucking hilarious.

        Hollow chocolate bunny. priceless.

      2. I am sooo stealing this.

    2. That is really a no-brainer isnt it?

    3. He promised to lower costs, and then passed a bill that will do the opposite. How anyone ever believed that expanding coverage, expanding benefits, and taxing makers of medical devices would lower costs is beyond me.

      1. Yeah, this is the one I pose to my friends who support Obamacare. Forget the politics & philosophy. Explain to me how you do all these things & lower costs.


        1. If costs go up it’s clear that SOMEONE IN THIS COUNTRY DIDN’T BELIEVE.

        2. Even SNL made a joke about that at the time.

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