The Heritage Foundation 10/14/11
Back in February 2010, when Congress was still debating the Obamacare legislation, then-Speaker of the House Nancy Pelosi (D-CA) proclaimed to America that the law “will create 400,000 jobs almost immediately.” But according to a new report by Heritage’s James Sherk, Obamacare will have the opposite effect, pricing many unskilled workers out of full-time employment due to the law’s requirement that employers offer health benefits to full-time employees.
According to Sherk, the minimum cost of employing full-time workers under Obamacare amounts to an average of $27,500, more than what many unskilled employees produce. He explains in his paper, “Obamacare Will Price Less Skilled Workers Out of Full-Time Jobs” why increased costs will lead employers to shift to employing part-time workers:
After paying the new health premiums, the minimum wage, payroll taxes, and unemployment insurance taxes, hiring a full-time worker will cost employers at least $10.03 per hour. Full-time workers with family health plans will cost $13.75 per hour.
Employers who hire workers with productivity below these rates will lose money. Businesses employing less skilled workers will probably respond by dumping their employees onto the federally subsidized health care exchanges and replacing full-time positions with part-time jobs.
Fewer full-time jobs in favor of more part-time positions is not what America needs, particularly as it struggles with a stagnant economy, 9.1 percent unemployment, and 14 million people out of work. But just when the United States needs businesses to expand, grow, and invest, Obamacare is piling on the costs and regulations–making it more difficult for businesses to create new jobs.
Under the law, businesses with more than 50 workers must purchase more expensive government-approved insurance or pay a penalty, thereby reducing the amount of capital they have to invest in expanding and hiring new workers. That requirement also has the effect of incentivizing businesses with fewer than 50 employees to maintain their size to avoid the costs. And then there’s the uncertainty that Obamacare has brought about–businesses don’t know what their future costs will be under the legislation, making it difficult for them to plan for the future.
America might already be seeing the job-killing effects of the President’s signature law. Sherk writes that following Obamacare’s passage, economic growth in America changed course:
Initially, the economy appeared on track for a steady recovery. The economy went from losing 841,000 jobs in January 2009–the recession’s low point–to gaining 229,000 jobs in April 2010…
Within two months of Obamacare’s passing, the recovery stalled… In May 2010, the job situation stopped improving. Job creation dropped to just 48,000 net private sector jobs, and private-sector hiring took a new course. From May 2010 onward, private job growth improved by only 6,500 jobs per month–less than one-tenth the previous rate.
Though correlation doesn’t prove causation, the economy’s slowdown following the passage of Obamacare, when considered alongside complaints from business owners about the law’s effects on new hiring, should cause alarm for anyone who cares about unemployment in America. Heritage’s Nina Owcharenko explains why the law is the wrong prescription for turning the economy around:
Obamacare is perhaps the most damaging of the Administration’s policies that are impeding the country’s recovery. At a time when there should be a focus on cutting spending, reducing regulation, and lowering taxes, Obamacare does the complete opposite. It spends more, imposes costly new mandates and regulations, and raises taxes on individuals and businesses. This is no way to get the economy up and running again.
Unfortunately, Obamacare will make an already bad economic picture worse. Unskilled workers are struggling to find employment, and the President’s health care law will make finding full-time jobs even more difficult. If President Obama truly wants to reduce unemployment and help businesses grow, he should admit that Obamacare was a mistake and work with Congress to repeal it.