My Predicted Biggest Economic Story of 2013

Last year I predicted that the biggest economic story of 2013 would be the end of full-time work (due to Obamacare) in the retail service industry.  I seldom make predictions, but wrote that at the time because I was amazed that this shift to part time work was all we were talking about in the small business world, since for technical reasons in the law we had to have these changes in place in 2013, well before the 2014 start of the employer mandate.

The media world is finally catching up, particularly after recent jobs reports where the totality of net new job creation (and more) was in part time jobs.  Here is yet another story from the media finally noticing a business conversation that has been going on for almost a year:

Employers around the country, from fast-food franchises to colleges, have told NBC News that they will be cutting workers’ hours below 30 a week because they can’t afford to offer the health insurance mandated by the Affordable Care Act, also known as Obamacare.

“To tell somebody that you’ve got to decrease their hours because of a law passed in Washington is very frustrating to me,” said Loren Goodridge, who owns 21 Subway franchises, including a restaurant in Kennebunk. “I know the impact I’m having on some of my employees.”

Goodridge said he’s cutting the hours of 50 workers to no more than 29 a week so he won’t trigger the provision in the new health care law that requires employers to offer coverage to employees who work 30 hours or more per week. The provision takes effect in 16 months....

The White House dismisses such examples as "anecdotal." Jason Furman, chairman of the president’s Council of Economic Advisors, said, “We are seeing no systematic evidence that the Affordable Care Act is having an adverse impact on job growth or the number of hours employees are working. … [S]ince the ACA became law, nearly 90 percent of the gain in employment has been in full-time positions.”

But the president of an influential union that supports Obamacare said the White House is wrong.

"It IS happening," insisted Joseph Hansen, president of the United Food and Commercial Workers union, which has 1.2 million members.  "Wait a year. You'll see tremendous impact as workers have their hours reduced and their incomes reduced. The facts are already starting to show up. Their statistics, I think, are a little behind the time."

This has to be spin by the Obama Administration and not an honest belief.  There is no way they could have missed this:

In June, the household survey reported that part-time jobs soared by 360,000 to 28,059,000 – an all time record high. Full time jobs? Down 240,000.  And looking back at the entire year, so far in 2013, just 130K Full-Time Jobs have been added, offset by a whopping 557K Part-Time jobs.

I have written before that I think these changes are here to stay.  In some cases it is actually easier for businesses to stitch together full service coverage from part-time workers, as I discussed in this article at Forbes.

  • Chad Evans

    One thing that is not being said about the part-time workers, and something I am not clear on: is there any indication that the part-time workers had health insurance before, and are now having it taken away? Some companies I have heard of have a 32+ hours/week got access to some form of insurance, but this would clearly be a net loss for many people, since they still don't have ACA to rely on.

  • chiliferealty

    yeah, based upon what you said in the Forbes article (and my own experience) this may be a genie that cannot be put back into the bottle, even if the Obamacare requirement is changed (to higher hours). This kind of arrangement just works better for retail businesses.

  • Daublin

    @Chad, it's not as simple as one job being swapped for another. Businesses are restructuring how they provide their existing service using a new mix of jobs. Since full-time workers are very expensive, the mix now has fewer full-time workers in it than before Obama. Based on reports, a *lot* fewer full-time workers.

    Full-time workers for higher-salaried jobs are largely unaffected. They mostly offer health benefits already, and the small additional cost of the extra benefits being mandated can be eaten out of the cash part of the salaries, anyway.

    Putting these two things together, we see that the health care mandate is part of outlawing lower parts of society that are deemed distasteful in D.C. They can't shop at Walmart, they can't sell their untested hippie toys to each other, they can't take pay-day loans, and they can't take low-end starter jobs.

    The fantasy is that if you outlaw distasteful jobs (stores... toys... loans...), all the people in them will magically find a better job. I think this fantasy fails to appreciate why people take crummy jobs to begin with. By and large they are making the best of a bad situation.

  • Joshua Vanderberg

    I am becoming convinced that a single payer system funded by a new 10% payroll tax would have been simpler, and less damaging to the economy. Not that I want a single payer system, just that it would have been world's better than this ill-conceived hybrid public/private mess.

    Our basic problem is that we were sold a free lunch - the idea that we could expand coverage and increase quality with no net increase in cost. Bullshit. If you want universal coverage, be honest about what it will cost, and then go and raise the tax dollars to pay for it.

  • Chad Evans

    @1d77a4f85f4a3ad401d45239a4455086:disqus I was really thinking more about the financial impact to the company. Does this change make the company slightly better off, since they are REDUCING their benefits? Or, as I think it is, there is no change in the company's position, which is why they are moving the employees to part-time (<30), so they can merely keep the status quo.

  • marque2

    I got to tell you, my personal insurance has gone up 50% over the last two years to cover the new mandated " free" services. If I were a business owner in a lower salaried joint I would seriously consider dropping the insurance if the premium goes up that much

  • jimbeaux

    These "free" services? They have three categories: Adults, women, and children. Women have 22 free preventative services, including breast cancer screening, cervical cancer screening, STD screenings, osteoporosis screenings, etc. Men, however, are completely left out of the equation. Where are the prostate cancer screenings? Testicular cancer screenings? How come women can get screened for STDs but men can't? Is that short-sighted or what?

    So yes, you're paying for these "free" services - these completely gender-biased free services!

    http://www.hhs.gov/healthcare/facts/factsheets/2010/07/preventive-services-list.html#CoveredPreventiveServicesforAdults

    http://www.change.org/petitions/the-president-of-the-united-states-stop-sexism-in-the-affordable-care-act-obamacare

  • marque2

    It isn't just screening. I also need to pay for birthing .and birth control - even though none of the people in my family unit are of the age when they would need any of it.

  • Solomon Foster

    Presumably not. The worry here is that people will be moved from full-time workers without benefits to part-time workers without benefits.

  • http://thegameiam.wordpress.com David

    When I was a fast-food employee, a big part of how I survived was by working a ton of hours and getting overtime. I did not have health insurance, and at those (rare) positions where it was offered I declined it because I was young & healthy, and it was not worth it at the time. This to severely part-time work curtails that ability to survive - instead of getting time-and-a-half for everything over 40 (so the 50 hour week is really 55 hours' worth of wages) now employees will have to have two separate employers, and work 20 at one, and 25 at the other to make the same wage. This is an entirely predictable, terrible, consequence.

  • http://thegameiam.wordpress.com David

    There is a tremendous cost to the workers - by pulling them away from 40 hours, it means that there is no chance that they'll ever be able to get overtime, which is a tremendous pay bump for hardworking retail workers.

  • skhpcola

    "Our basic problem is that we were sold a free lunch..."

    No, it was marketed as a free lunch. Big difference. It was only sold to those that have Marxist wet dreams and the leeches of society. The sentient and liberty-loving Americans rejected the plan outright, although that hardly did any good in the face of RINOs and leftist filth in Congress that voted to ruin the US health delivery system.

  • perlhaqr

    Math error: "30 at one, and 25 at the other".

    So, yes. The poorest workers still won't have health insurance, and now they'll have five fewer free hours a week as well.

  • Dave Boz

    So, can't we just pass a law and fix this? Make part-time jobs illegal and every worker will have a full-time job.
    Passing laws is how we fix problems. We have lots of problems, so let's get busy passing lots of laws.

  • Joe_Da

    Paul Krugman claims that this is not happening
    Krugman also claims that numerous studies show that raising the minimum wage will have no effect on the demand for labor.

  • sch

    Oh the irony, not only marginal instructor positions at universities and community colleges are getting down sized so that adjunct and non tenured teaching positions are being reshuffled to 'less than 30 hours per week", but grad students are being hit with the same stick. Locally grad students are no longer allowed to do tutoring in addition to their teaching hours to keep them below the 30 hour weekly time frame. It will be interesting to see how the top heavy administrative academic structures shake out over the next 10 years as
    state affiliated but poorly state supported institutions become more financially stressed.

  • Dimitri Mariutto

    So it seems like employers are rolling back part time workers to less than 30 hours per week to get around the ACA but the way I understand it, it is the Full Time Equivalent Employee score that matters. Link here: http://business.usa.gov/sites/default/files/Calculating%20FTEs%20for%20businessUSA.pdf

    Associated article: http://washingtonexaminer.com/sorry-businesses-cannot-avoid-obamacare-by-switching-to-part-time-staff/article/2533781

    Does everyone realize this? It appears to me that no one does.

  • rxc

    You are the oppressor, so you get to reimburse the oppressed for the millenia of suffering that your forefathers inflicted on them. /sarc

  • http://devilish-details.blogspot.com/ mesaeconoguy

    Precisely.

    This is the largest expansion of entitlements in 50, and likely 80 years.

    It was passed entirely along party lines:

    http://politicalmathblog.com/?p=424

    No other major entitlement or civil rights legislation bears that mark, thus making it illegitimate.

    It is also legally illegitimate, thanks to Obama’s arbitrary flouting of the “mandatory” employer requirement.

    I am planning on disregarding the rule next year, at tax time. I refuse to fill out the health
    care law form. They can come get me.

    If they challenge that, I will file suit immediately.

  • skhpcola

    I wish you luck in attaining standing before our judicial overlords. The state of that branch of government is so out of whack with foundational constructionist principles that these judges set dangerous new precedents every time that they rule on issues...even common-sensical crap that laypeople would immediately understand as being in contravention of basic principles.

    But I'm with you. When push comes to shove, the fragile alliance of statists will crumble and Ozerocare will be proved to be unworkable. They--the Marxist shitheels behind this power grab--that they'll be able to Alinsky the health insurance industry out of existence and usher in single-payer, goobermint-provided health care. That is going to fail even worse. Chaos is their end game...

  • http://devilish-details.blogspot.com/ mesaeconoguy

    Great point: standing.

    Guess what? The IRS form whatever gets folded into this year’s filing, so we all have standing now. Everyone is subject to this law.

    Game on.

  • http://devilish-details.blogspot.com/ mesaeconoguy

    I froth at the opportunity to get Lois Lerner, and her replacement, in deposition.

    Bring it.

  • http://devilish-details.blogspot.com/ mesaeconoguy

    Krugman is a very, very smart person suffering from A Socialist Scumbag Having Overt Leftist Economia syndrome.

  • http://devilish-details.blogspot.com/ mesaeconoguy

    Um, yeah, wow, that’s a bombshell

    Here’s the slide text:

    Full Time Equivalent (FTE) Employee:

    a combination of employees,

    each of whom individually is not a
    full time employee because they

    are not employed on average at least
    30 hours per week, but who,

    in combination, are counted as the
    equivalent of a full time employee

    For example, two employees, each of
    whom works 15 hours per

    week, are the equivalent of one full time employee

    So the total hours tallied by X workers is your breakpoint, not necessarily hours worked individually.

    Of course, the overall reduction remains, so if this is true, this is the worst of all worlds.

    But expected, given government efficiency.

  • http://devilish-details.blogspot.com/ mesaeconoguy

    Here’s the operative math (and what Warren based his decision to cut all nonessential employees to part time):

    Example: Company X has 40 full time

    employees working 40 hours

    per week, along with 20 part time
    employees working 15 hours per
    week.

    The 20 part time employees are
    counted as 10 full time equivalent employees.

    Company X has 50 full time employees
    and is subject to the employer shared
    responsibility provisions.

    FTE is only a partial calculation; cumulative additions to part time employees still count towards the 30 hr FTE threshold, further incentivizing employers to cut hours.

    This is an insidious law, and U-6 unemployment will continue to explode with this stupidity.

  • slocum

    The full-time equivalent score determines whether or not a company is large enough to be subject to Obamacare mandates -- that's true -- but even for big companies that are subject to the mandates, part-time workers need not be provided coverage and there is no fine for not doing so. That's what is driving the shift to part time work.

  • Joe_Da

    Your understating his affliction

  • slocum

    "Full-time workers for higher-salaried jobs are largely unaffected. They mostly offer health benefits already, and the small additional cost of the extra benefits being mandated can be eaten out of the cash part of the salaries, anyway."

    And in a lot of cases, there are no extra benefits being mandated because employers who self-insure aren't subject to coverage mandates. As a result, many employers (even relatively small ones) are looking to switch to self-insurance plans.

  • AnInquirer

    The poorest workers can now get insurance from federally mandated exchanges instead of whatever is provided at the state level. Before Obamacare, states gnerally did provide health care to the uninsured BUT a person needed to exhaust his or her assets before the state would cover health expenses. A key part of Obamacare (via community ratings & non-exclusion of pre-existing conditions) is to remove the outcome where an uninsured individual needed to become poor before getting health care. And if a person's financial resources make it tough to get insurance from the exchanges, then taxpayers will subsidize that insurance.