Posted tagged ‘impacts’

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.

The Fiscal “Cliff” is No “Bluff”

November 27, 2012

Linguists will take exception to that and note that a cliff is, in fact, a bluff.    The consensus among economists, however,  is that the fiscal cliff is indeed no bluff.    A number of commentators have noted that the fiscal cliff is more like a slope and will not  cause immediate economic calamity.  I was one of those as a guest on NHPR’s “The Exchange“.   But just as there was once too much hyperbole surrounding the fiscal cliff issue, now, as we get closer to the deadlines when the combination of tax hikes  and spending cuts that define the fiscal cliff take effect, there seems to be more of an effort to minimize the likely impacts that will occur if no resolution is found.  That would be a mistake because whether the spending cuts take effect immediately or over the course of a year or more, and whether the tax hikes immediately effect spending and investment decisions is not the issue.  The issue is that the U.S. economy is simply not growing fast enough to withstand the impacts of the full implementation of the provisions of the fiscal cliff.  Skeptics fire away, but below is a succinct chart that shows how the effects of the fiscal cliff relate to real growth in our nation’s economy, assuming the effects of the cliff occur in 2014.  To lump all effects in one year isn’t accurate, but the point is to place the magnitude of the cliff’s impacts into context.  I believe the context in the chart below highlights the importance of a reasonable resolution to the potential problems the cliff could cause.

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