Posted tagged ‘affordable care act’

More Early Evidence on the Impacts of the Affordable Care Act

May 9, 2013

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.

Avg Hours Worked in Leisure and Hospitality Industries

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.

What’s Behind the Weak Jobs Report?

April 5, 2013

Bad news arrived today with the release of the monthly employment report by the U.S. Bureau of Labor Statistics.  Only 88,000 non-farm jobs were added across the country in March. Following  two months which saw the U.S. add 148,000 and 268,000 jobs respectively in January and February, the low number raises concerns that the U.S. may again be heading for a “Summer slump” after showing signs of stronger job growth early in the year.

I share that concern but I am most interested in what the job growth numbers may or may not imply about recent U.S. economic and domestic policies.  I know sequestration is the hot policy topic and may be blamed or credited for all evil or good that occurs in the U.S, economy this year, but it is really too early for it to register much  impact on March’s job growth.  Two other policies have the potential to more significantly impact job growth in the near term.  The details of the March employment report provide some clues about if and how these policies may affect job growth in the future. The elimination of the temporary reduction in the payroll tax and health care coverage mandates in the Affordable Care Act are policy impacts that we worried about before we started worrying more about the potential impacts of sequestration.

I last posted that gains in home values, stocks and, retirement accounts along with increases in wages and salaries would help the economy overcome the large potential impact on consumer spending from the rise in the payroll tax (elimination of the temporary rate reduction) that took effect in January.  I may have been a little too optimistic about those factors ability to help the U.S. economy overcome more than $100 billion in lost consumer spending power (over $600 million in New Hampshire).   For me, the most troubling piece of data from the March job growth report was the seasonally adjusted decline of 24 thousand retail trade workers and generally downward trend since January, that has followed several months of solid gains in late 2012 (chart below).

U.S. Retail emplyoyment

When housing values are recovering, homeowner’s equity is rising, and employment and wages are growing, retail employment should not decline.  The elimination of the payroll tax cut (along with higher gasoline prices early in the year) likely provided a greater shock to consumers than anticipated.  But another explanation is that implementation of the health care mandates of the ACA could be affecting employment more in some industries.  If so, it would likely impact industries that typically are less likely to offer their employees health care coverage and industries that employ more part-time workers.  Retail and leisure and hospitality industries  meet those criteria but only retail trade lost employment in March.  Because the ACA mandates coverage for full-time employees, one way to avoid the mandate would be to increase part-time employment.  In that case I would expect the average weekly hours of workers in retail or other industries that may be more  affected by the mandate to decline, as more workers were shifted to part-time status but average hours have increased slightly in retail over the past three months.  Looking more closely at the data on part-time employment is needed to get a handle on any ACA impacts.  Over the next few months I will be looking for evidence of  increases in the number of workers working “part-time for economic reasons” – meaning they are working part-time when they want to be working full-time, as well as employment trends in businesses employing between 50 and 499 workers (those most affected by ACA).  Trends in these employment data would provide stronger evidence of any ACA effects but for now, it looks like the payroll tax is the culprit in the retail employment data.


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