MAINE Senator Susan Collins used her delivery of the weekly Republican radio address to criticize a certain aspect of Obamacare, while at the same time promoting legislation she believes will address this flawed aspect (among many according to the Senator) of the healthcare law. The radio address comes a couple of weeks following a WSJ article which she co-wrote with Indiana Sen. Joe Donnelly, discussing the legislation they are proposing that:
[D]efines a full-time employee for the purposes of complying with the Affordable Care Act as someone who works an average of 40 hours per week, or 174 hours per month for full-time equivalents.
Why this legislation? Well, according to the two Senators, the ACA’s definition of full-time employment being any person working 30 hours or more in a week is eroding the job market, incomes, and all else labor market related; as evidenced by their anecdotal evidence, supported by misleading figures. From the two Senators:
In Lafayette, Ind., a school district cut the hours of 200 support staff to no more than 29 per week. In Bangor, Maine, the school system is preparing to track and cap the number of hours worked by substitute teachers to ensure that they don’t work more than 29 hours a week. Elsewhere, in Portland, Maine, a small business reduced a part-time employee’s hours from 35 to 29.
We are hearing reports like this from across the country. Why is this happening?
It’s happening because under the Affordable Care Act a “full-time employee” is defined as anyone working an average of 30 hours a week, rather than the traditionally accepted 40-hour work week. Employers with more than 50 full-time employees or full-time equivalents will be required to provide their employees with health insurance or potentially face a financial penalty, essentially a fine.
This rule is causing a growing number of employers to cut the hours of their workers, and according to one study by the UC Berkeley Labor Center, at least 2.3 million workers are at risk. This provision of the health law is not in the best interests of the country, and it needs to change.
Okay. Here we go again with, the ‘ACA is killing the job market and incomes’ garbage again. I am not going to argue that the ACA is, as drafted, a good idea. I am, however, going to take issue with three points the Senators make because they are wrong. Basically, Collins’ arguments vis-a-vis the ACA are premised on a flawed understanding of current and recent labor economic indicators, trends, and empirical studies.
Point 1: The employer mandate is not going to destroy employment
The economic argument against the employer mandate is that it will increase labor costs for businesses (businesses with over 50 employees) by offering health insurance. In turn, businesses will look to minimize costs by cutting employee hours below the 30 hour mark. As a result, employees will not only not benefit from the ACA, but they will be harmed because they will lose pay. For instance, a worker not currently offered health insurance but working 35 hours a week at say, $12/hour, will see their hours trimmed down to 29; as a result a loss of $72/week in pay, or $3,744 for the year. Sounds convincing, but remember, increase is relative between two points. In this case, cost B>cost A, and with the employer mandate businesses will see costs shift from A to B. But what if businesses are already at cost? Then we would not see an increase in costs, and that is the situation for a vast majority of businesses.
According to a Kaiser Family Foundation study published last September, most businesses are already offering health insurance; meaning they are already at cost point B. While the study points out that smaller businesses are less likely to offer health insurance–a concern regarding the employer mandate because smaller businesses are less likely to be able to shoulder the financial cost of offering health insurance–, those businesses that fall under the mandate (50 or more employees) already offer health insurance. The percentage of businesses offering health insurance by number of employees is as follows:
3 – 9 Workers—50%
10 – 24 Workers—73%
25 – 49 Workers—87%
50 – 199 Workers—94%
200 – 999 Workers—97%
1,000 – 4,999 Workers—100%
5,000 or more Workers—100%
It’ pretty clear that most businesses will not see the employment costs increase via the employer mandate. Yes, some will, but on balance, the majority will see not net change in their costs. Moreover, employers have benefited from the recession, slack demand in the labor market resulting in downward pressure on wages, and the like as indicated by the employment cost index:
Of course, the ECI data is only a decade old, so we have a less than complete picture of where the current ECI measures against a large sample size. However, we see that businesses were able to handle vastly higher ECI growth rates than what is happening at present prior to the recession. Moreover, while employment costs have grown, they are not outpacing either the CPI or PCE, meaning worker compensation is growing at a slower rate than prices (the below graph shows annual rates of change to smooth out the lines):
2. The ACA has nothing to do with diminishing hours or incomes
The ACA has become the scapegoat for any ailment in the labor market, which is unfortunate because it distracts policymakers and the public from trying to address those problems. Collins is a believer in the confidence, as she alluded to in a recent interview with the BDN:
As a result, she is going all in on this notion that the ACA is responsible for the decline in hours, wages, etc. because of the uncertainty it is creating (remember, the employer mandate is not place, and will not be until 2015, which means any impact one claims the ACA is having part-time/full-time employment is because of confidence/uncertainty). However, let’s look at the Collins-Donnelly claims vis-a-vis incomes. Remember, regarding the cut in hours and wages, the two Senators state:
It’s happening because under the Affordable Care Act a “full-time employee” is defined as anyone working an average of 30 hours a week, rather than the traditionally accepted 40-hour work week.
Regarding hours, apparently the ACA has been in play for a while, given the historical trend of average weekly hours:
Of course, the concern vis-a-vis the ACA is not necessarily hours, but the shift we are experiencing in our labor market from full-time to part-time work. But again, recent trends suggest that the ACA has little (if anything) to do with this shift:
Any downward trends in hours and/or full-time work started well before Congress passed the ACA.
So what’s the problem with pushing the hours up to 40? Maybe, maybe not. The impact will be predicated on the hours requirements of employees, and whether businesses change those requirements should the Collins-Donnelly legislation pass. For instance, if businesses currently require 40 hours a week for their employees to be eligible for health benefits, then the legislation will have no impact. However, if businesses require less than 40 (anecdotally, 37.5 and 32 were the requirements for my two previous employers), then the new law would have an impact IF businesses decide to change their requirements from somewhere below 40 hours a week to 40 hours.
Of course, the above pertains to those employees current getting benefits, and the focus of the ACA and the employer mandate was to increase workers’ accessibility fo health insurance. So how would the Collins-Donnelly legislation impact workers currently without insurance? For those working below 30 hours it would have no impact, given that the ACA would not require employers to provide insurance to those workers. For those working 30 – 39 hours a week, it would mean their access to health care would be up to their employers’ decision to provide them coverage. However, the focus of the legislation is to ensure that these workers would not see their hours cut to below 30 in order to avoid having to provide them health care. Looking to studies on two states with healthcare mandates, Massachusetts and Hawaii, concerns employers reducing hours is not grounded in empirical evidence.
In a 2009 paper examining the impact of Hawaii’s healthcare mandate, which , Buchmueller, DiNardo, and Valletta found wages decreased by approximately 1.7%, while the number of part-time workers increased 1.4%, both statistically insignificant even though Hawaii’s mandate defined part-time workers as those employees working fewer than 20 hours. What the BDV study found significant was that Hawaii’s healthcare mandate did not substantially increase insurance coverage as a percentage of the population. Similarly, a 2012 study by Dubay, Long, and Lawton on the impact of Massachusetts’ healthcare mandate found the mandate had no impact on wages or hours. The Massachusetts mandate had a full-time definition of 35 hours per week, which, unlike Hawaii’s mandate, has increased the number of persons covered by health insurance.
There is little evidence suggesting that the ACA has, as evidenced by recent national labor market trends, or will, based on the Hawaii and Massachusetts healthcare mandates. As a result, the Collins-Donnelly legislation is unlikely to prevent a decline in the workers’ wages and/or hours as a result from the ACA’s definition of full-time employment. What’s peculiar about the Collins-Donnelly piece is that it relies on a study by the UC Berkely Labor Center, which noted the two studies I cited. In that Data Brief, the Labor Center writes:
The 2.3 million workers identified as at greatest risk for work hour reduction represent 1.8 percent of the United States workforce. This is consistent with the research on the impact of Hawaii’s health care law on work hours. Hawaii requires firms to provide health insurance to employees working 20 hours a week or more, so the cost to employers for full-time workers are much greater in Hawaii than under the ACA, while the hour threshold is lower. Buchmueller, DiNardo and Valetta (2011) found a 1.4 percentage point increase in the share of employees working less than 20 hours a week as a result of the law. In Massachusetts, where the employer penalty is smaller than in the ACA ($295 per year), there was no evidence of a disproportionate shift towards part-time work compared to the rest of the nation.
The Collins-Donnelly legislation addresses what two studies found to be a non-existent or statistically insignificant problem. Conversely, this legislation would assuredly prevent those the ACA is aimed at helping (those currently not receiving healthcare and working between 30 – 39 hours/week) from gaining such access. Moreover, the Collins-Donnelly legislation would promote flawed understandings of the labor market, which in turn would likely impact Congressional votes on min. wage, the Working Families Flexibility Act, and other employment/labor related legislation.
* I am really struggling to understand how regulatory certainty is given so much credibility. It’s not to say certainty and confidence vis-a-vis regs, taxes, etc. don’t play a role in business decisions, but to say that the ACA–passed three years ago, and two years after the economic collapse, and well after the beginning downward trends in various labor market indicators and without passage of the employer mandate–is responsible for weak labor market now is, to use Collins’ words, absurd.
FROM the Kennebec Journal’s editorial staff on Syria and the Maine Congressional delegates:
And after the initial period of U.S. intervention is over, what then? If Assad’s position remains strong, there would be a call for more U.S. missiles. If Assad is toppled, now or in the future, it is unlikely the rebels would lay down their arms and allow peacekeepers. More likely, the disparate factions, some aligned with al-Qaida, would continue fighting for control. (more…)
THE BLS just released its employment data for August, showing the U.S. economy added 169,000 jobs–short of what many analysts had predicted. Highlights from the Household Survey data:
In August, the number of long-term unemployed (those jobless for 27 weeks or more) was about unchanged at 4.3 million. These individuals accounted for 37.9 percent of the unemployed. Over the past 12 months,the number of long-term unemployed has declined by 733,000.
The civilian labor force participation rate edged down to 63.2 percent in August. The employment-population ratio, at 58.6 percent, was essentially unchanged. (more…)
THE ADP National Employment Report for the month of August was released earlier today, reporting the U.S. economy added 176,000 jobs. Here’s a quick breakdown of those jobs from the report: (more…)
“While I believe I have the authority to carry out this military action without specific congressional authorization, I know that the country will be stronger if we take this course, and our actions will be even more effective,” Obama said in his comments to the nation, with Vice President Biden by his side.
The Executive does not, in fact, require Congressional consent to commence all forms of military action. Under the War Powers Resolution of 1973, the President can conduct military operations for up to 60 days without receiving Congressional consent. However, the WPA only allows for the President to do so under unique circumstances:
The constitutional powers of the President as Commander-in-Chief to introduce United States Armed Forces into hostilities, or into situations where imminent involvement in hostilities is clearly indicated by the circumstances, are exercised only pursuant to (1) a declaration of war, (2) specific statutory authorization, or (3) a national emergency created by attack upon the United States, its territories or possessions, or its armed forces.
There is nothing under the WPA to suggest the President has the authority to conduct military operations in Syria without Congressional consent, and one has to believe he and his advisers knows this. So what authority could he be referring to? (more…)