First, let me start by noting that this is not a post about the merits of the Affordable Care Act (ACA), depending on your political leanings either pejoratively or admiringly labeled “Obamacare,” it is a post about policy analysis. I love public policy analysis and I tell almost everyone who asks me (there aren’t many) that to understand the full impacts of any proposal it is far more important to understand the incentives inherent in a policy proposal than it is to understand the goals, objectives or intentions of the proposal. Businesses, just like individuals, will respond to changes in public policies according to their self-interests. In the case of the ACA, businesses wishing to avoid providing health insurance coverage to some or all employees have an incentive to keep employment levels below the employment threshold at which the ACA applies to a business (50 employees) or reduce the number of full-time employees in order to fall below the threshold.
In a prior post I noted that there was some early evidence of the effects of these incentives on retail employment (an industry with a higher percentage of workers without health insurance coverage) but that I thought more evidence was needed to evaluate any impacts from the ACA. At that time I suggested that the expiration of the payroll tax cut might be more responsible for declines in retail employment than any impacts from the ACA. I promised to follow the issue so here is some additional evidence and unfortunately it points to some negative employment impacts from the ACA. Whether this will continue and if it is does whether the negative impacts outweigh any positive impacts from the ACA is fodder for future posts. For now, the chart below shows how the average hours worked in the leisure and hospitality industry has been declining. This is an industry with the highest percentage of workers without health care coverage and also with a high percentage of employers near the threshold at which the ACA mandates apply. It is also an industry that employs large numbers of part-time workers, making it relatively easy for employers to reduce the hours worked by employees in order to have them fall below the criterion that would have them classified as full-time employees for purposes of ACA mandates. As the chart shows, the average weekly hours worked in the industry (compared to the same month of the prior year) has declined significantly since the end of 2012.
It is still to0 early to make claims about negative employment impacts from the ACA but the evidence is beginning to point to some troubling impacts. As we move toward the implementation date for the ACA any employment impacts will become clearer as employers looking to avoid mandates get closer to finalizing the employment level averages that will be used to determine their inclusion or exemption from ACA mandates. Empirically it may be too early to make a definitive call on the ACA’s employment impacts, but based on what I see as the incentives inherent in the ACA, it is just a matter of time before the call gets made.