A Nation of Part-Time Workers, Thanks to Obamacare



The Affordable Care Act not only makes hiring full-time workers more expensive for employers than part-timers, according to a new research paper, it also directly penalizes full-time workers. That will drive at least some people to—perversely—reduce their hours in order to increase their compensation. The end result for the country is likely to be the equivalent of 4 million fewer full-time-workers.

In "The Affordable Care Act and the New Economics of Part-Time Work," Casey B. Mulligan, professor of economics at the University of Chicago, writes, "Three major provisions of the ACA introduce incentives to change the workweek. The most obvious is the explicit penalty on assessable large employers that do not offer health insurance to their full-time employees." Employers are not required to offer benefits to part-time employees, creating an obvious incentive to reduce working hours and rely on part-time and contract employees instead of full-time workers.

In fact, Federal Reserve Banks around the country find exactly that pattern underway when they survey employers. After polling manufacturers and business leaders in August, the New York Federal Reserve Bank found:

About 20 percent of respondents in both surveys said that they were reducing the number of workers and/or raising the share of part-time workers. A similar proportion said they were paying less compensation per worker because of the ACA, and a similar proportion of manufacturers said they were outsourcing more work.

The Federal Reserve Bank of Dallas received remarkably similar answers to a survey of service-sector employers. Because of costs imposed by the Afordable Care Act, 20.8 percent of them said the number of people they employ will be lower (2.7 percent say it will be higher). And 22.4 percent say they'll use a higher proportion of cost-reducing part-time, contract, or temporary workers (7.1 percent will use fewer).

Federal Reserve Banks in Philadelphia and Atlanta reported similar responses.

But Mulligan adds that, in addition to disincentives for employers to use full-time workers, the ACA also nudges workers to reduce their hours with the "provision that full-time employees and their families cannot receive subsidized health coverage on the ACA's health insurance exchanges…unless their employer fails to offer affordable coverage." Some employees also have an incentive to work less because of "the provision that gives lower subsidies to families with higher incomes." Under the law, a good many workers stand to make more money, once subsidies are included, by working below the part-time threshold than by working full-time.

These pressures on workers to put in fewer hours may actually be stronger than those more widely discussed incentives for employers to cut hours.

How big a disincentive? Mulligan compares a 40-hour-per-week full-timer at $52,000 annually to a 29-hour-per-week part-timer at $37,700. After taxes, expenses, and subsidies, the part-timer walks away with $28,854, compared to $27,021 for the full-timer.

The bottom line, says Mulligan, is that:

  • The ACA's employment taxes create strong incentives to work less. The health subsidies' structure will put millions in a position in which working part time (29 hours or fewer, as defined by the ACA) will yield more disposable income than working their normal full-time schedule.
  • The reduction in weekly employment due to these ACA disincentives is estimated to be about 3 percent, or about 4 million fewer full-time-equivalent workers. This is the aggregate result of the law's employment disincentives, and is nearly double the impact most recently estimated by the Congressional Budget Office.
  • Nearly half of American workers will be affected by at least one of the ACA's employment taxes—and this does not account for the indirect effect on others as the labor market adjusts.
  • The ACA will push more women than men into part-time work. Because a greater percentage of women work just above 30 hours per week, it is women who will be more likely to drop to part-time work as defined by the ACA.

Hmmm…Many Americans can make more by working less and taking tax-funded subsidies. And we'll have the equivalent of 4 million fewer people working, as a result (and paying the taxes for those subsidies).

You have to wonder what that will do to the economy.

NEXT: 2011: Rand Paul "Most Interesting Man in Senate." Now: "Most Interesting Man in Politics."

Editor's Note: We invite comments and request that they be civil and on-topic. We do not moderate or assume any responsibility for comments, which are owned by the readers who post them. Comments do not represent the views of Reason.com or Reason Foundation. We reserve the right to delete any comment for any reason at any time. Report abuses.

  1. But see, Obama did us all a favor!

    Instead of working full-time, now we can use the extra time at home to pursue our hopes and dreams!

    1. How about pursuing HIM with torches and pitchforks?

    2. Now that’s change you can believe in.

      1. I am giving up my full-time “permanent” job so that I can stay at home at LEAST part-time, and smear dog-poop on the wall, in artistic arrangements that will benefit the global humanoid community, and maybe even reduce globabble warmerererering…. If just ONE polar bear is saved, it is ALL worth it, ya know… And NOT have to worry my pretty little head, in the least way, about my health care, while Ah am magnanimously benefitting the polar bears! (Maybe humanoids too, just a side benny). BEHOLD my wall-poop-art, and WEEP, ye heathens!

  2. Well its not like anybody saw this coming or said anything about it before the law went into affect right?

    1. Are you serious?

      Are you serious?

      We had to pass it to find out what’s in it! And now we know. It’s more super-awesome than we could have imagined!

      1. Except for all of the nasty things that money-grubbing plutocrats do and then unfairly blame on Obamacare. For that, I blame capitalism.

        1. I blame Bush

          1. Well him and his baseball stadium show he’s just another capitalist.

  3. This is actually a win-win for the Obama administration. Those part-time workers are technically not “unemployed”, so they don’t count toward the unemployment rate. Which makes it look like the economy is improving.

    1. Except everyone at street level can see that it’s not true.

      1. Anyone with half a brain can see it, but how many will choose to ignore it because TEAM BLUE.

        1. Team Blue is doing a pretty good job, but as a faithful lurker at Daily Kos, I can tell you that quite a few real-life Dems are indeed living and looking at street level.

          Which is why they’re screaming for single-payer.

          1. Have we achieved peak derp yet? I cannot take much more. *faints*

  4. Instead of working to build a life and escape poverty, now our nation of part-time workers will have the time they need to attend the speeches and protests of the peepul’s revolution!

  5. least surprising result ever.

  6. Fucking incentives- how do they work?

    1. You mean low-cut dresses, pushup bras, short shorts, and other fucking incentives?

  7. We need a companion article entitled:

    “A nation of subcontractors who should be employees, due to Reaganomics and the complete separation of morals and ethics from corporate behavior”.

    1. Are you actually conscious when you type or do you just kind of drift in and out?

    2. Look Squirrel!

      Honestly, do the people you deal with in real life fall for the kind of trick they make fun of in a cartoon?

    3. If you want someone to blame for the disappearance of ethics from the corporate world, take a long look at the decision to tax inheritance. Set aside that it is a second tax on money already taxed once; it means that it is especially hard for a family business to STAY a family business. Grandad, who founded the company, passes away, and the company os worth far more than the limit for non-taxable inheritance. So the company has to go public, to raise funds to pay the inheritance tax, and at that point the Suits take over. It isn’t THEIR name on the building, so they don’t care if they are caught doing something despicable but legal.

      1. Scienfoology Song? GAWD = Government Almighty’s Wrath Delivers

        Government loves me, This I know,
        For the Government tells me so,
        Little ones to GAWD belong,
        We are weak, but GAWD is strong!
        Yes, Guv-Mint loves me!
        Yes, Guv-Mint loves me!
        Yes, Guv-Mint loves me!
        My Nannies tell me so!

        GAWD does love me, yes indeed,
        Keeps me safe, and gives me feed,
        Shelters me from bad drugs and weed,
        And gives me all that I might need!
        Yes, Guv-Mint loves me!
        Yes, Guv-Mint loves me!
        Yes, Guv-Mint loves me!
        My Nannies tell me so!

        DEA, CIA, KGB,
        Our protectors, they will be,
        FBI, TSA, and FDA,
        With us, astride us, in every way!
        Yes, Guv-Mint loves me!
        Yes, Guv-Mint loves me!
        Yes, Guv-Mint loves me!
        My Nannies tell me so!

    4. Subcontractors = employment will probably end after contract is up, no long term healthcare coverage, benefits, and benefits necessary.

      Perfect for the ACA economy.

      1. strike one benefit

    5. the complete separation of morals and ethics from corporate behavior

      And which “morals and ethics” would you like corporations to comply with? Yours? Stalin’s? Obama’s? Fred Phelps’s? The Pope’s? It seems to me you get all pushed out of shape when companies like Hobby Lobby try to inject their morality into their business.

      Unless their corporate charter specifically says otherwise, corporations are supposed to maximize profit and comply with the law, nothing else.

  8. I’d think less work would mean less revenue (for the government, which is all that matters, right?) . . . but more subsidies. It seems something is not going to add up (as if this is something new or anything).

  9. “Hmmm…Many Americans can make more by working less and taking tax-funded subsidies. And we’ll have the equivalent of 4 million fewer people working, as a result (and paying the taxes for those subsidies).

    You have to wonder what that will do to the economy.”

    We’re heading towards Liberaltopia, of course.

    1. Oh it’ll be a boom for the economy. Ya see, people who work less are happier, and happier people are more productive. So you take 11 hours out of the workweek and the workers more than make up for it in increased productivity. Plus, they’ll have more time to go buy stuff and buying stuff is like, a natural stimulus package. It’ll also give people more time in the afternoon to spend time at the park or exercising, so they’ll spend less on healthcare in the long run.

      Can i stop? My ass is starting to hurt from pulling all these bullshit rationalizations out of it.

      1. Oh please. One only need look at the economic powerhouse that France is, to see that your attempt at satire is lame.
        Now go out and open a corner cafe and reap the benefits of this economic windfall.

  10. I should note that the Clinton Plan of 1993 was far superior to Obamacare in that financing was done through a payroll tax instead of asking employers to provide their (full time) employees with health care coverage. Naturally this gives employers every incentive to turn their full time workers into part time workers.

    These sort of problems were obvious right from the start as we had the example of “Romneycare” to see what the consequences would be.

    A far better solution is to repeal all the laws that make US health care so expensive. A good start would be to repeal prescription laws which would eliminate the legal monopoly that doctors currently enjoy over access to medical drugs. If you want to reduce the cost of health care, you start by giving people the legal right to take care of their own health. Of course this will arouse a great deal of opposition from those who profit from the current status quo in health care.

    1. You’re erroneously assuming that ACA is an attempt at a solution to health care problems, instead of massive crony capitalism.

      I agree that prescription laws are a problem. So are the excessive restrictions on medical licensing. But the biggest problem is probably the link between private health insurance and employers/employment.

  11. Obama’s gotta keep that gap between the top and bottom far enough apart so he can keep using it as a campaign theme. The guys a genius in a really evil way. We’re screwed.

  12. No, the CBO said workers would CHOOSE not to work so many hours, you see. It’s a choice. I mean, who cares if it’s people responding to basic economic realities? Think about how much more art will be produced with all the free time.

    The problem is that this isn’t a side-effect, but a design choice made by the Dems. And all of this was known, and only downplayed because they knew it wouldn’t sell to the American public. Just like every other ‘glitch.’ Reducing the work week is on every socialist/progressives agenda.

    Fox News had more accurate coverage of Obamacare than the NYT…

Please to post comments

Comments are closed.