The following originally appeared in the Wall Street Journal on October 11, 2013
There are times when the Obama administration makes statements so disconnected from economic reality that you wonder if any White House official has talked with anyone in business. A case in point: the administration’s mantra that ObamaCare’s definition of full-time employment as 30 or more hours per week had no effect on employers’ hiring practices.
We heard it Monday night on “The Daily Show” when Secretary of Health and Human Services Kathleen Sebelius told Jon Stewart: “At least the economists, not anecdotal folks, but economists, say there is absolutely no evidence that part-time work is going up. In fact, it’s going down.” We’ve been hearing that sort of thing for months—in July, White House Press Secretary Jay Carney told reporters that data failed to support “the proposition that businesses are not hiring full-time employees because of the Affordable Care Act.” The president himself added to the wonder on Sept. 26, stating that “there’s no widespread evidence” that ObamaCare is hurting jobs.
As the CEO of a company that has been dealing with ObamaCare for over three years, I’d like to set the record straight: The evidence that ObamaCare is having a negative impact on hiring is unequivocal, abundant and consistent with common sense.
The White House has been given cover on this matter by the president’s Council of Economic Advisers, which in September declared that “of the increase in employment since the Affordable Care Act became law, more than 9 out of 10 positions have been full-time.”
While ObamaCare “became law” on March 23, 2010, a legitimate analysis of its impact wouldn’t start on that date. No one understood the legislation at the time. Few people understand it today. The Department of Health and Human Services had issued no regulatory guidance. Businesses don’t change their hiring plans before understanding what changes they need to make and are compelled to make them.
ObamaCare’s future was uncertain in 2010-11. The Supreme Court didn’t rule on the law’s constitutionality until June 2012. The electorate didn’t resolve the issue of whether Mitt Romney might become president and lead the effort to overturn the Affordable Care Act until November 2012. Pending resolution of these issues, employers were disinclined to make major adjustments on matters that they were unsure would ever need adjusting.
In any event, ObamaCare’s mandate that employers provide health insurance coverage to employees who work 30 or more hours per week wasn’t set to take effect until Jan. 1, 2014. To determine whether an employee was working 30 or more hours per week, ObamaCare provides a “look back period” of three to 12 months. With a maximum one-year “look back,” employers had little incentive to significantly increase part-time employment until Jan. 1, 2013.
To understand ObamaCare’s impact on part-time employment, consider the six-month period between the employer mandate’s initial “look back” date of Jan. 1 and July 2, 2013, when the administration wisely announced it was delaying the employer mandate for a year. This is the period during which employers most significantly increased part-time employment in reaction to ObamaCare.
The health-care law’s actual consequences unequivocally appear in the jobs data for this period. Between Jan. 1 and June 30, according to the Bureau of Labor Statistics, the economy added 833,000 part-time jobs and lost 97,000 full-time jobs, for net creation of 736,000 jobs. In reality, the economy overall added no full-time jobs. Rather, it lost them.
It’s not like this six-month boom in part-time jobs went unnoticed. In July, Federal Reserve Chairman Ben Bernanke questioned whether the official unemployment rate fairly represented the state of the labor market because it didn’t reflect factors such as “underemployment, part-time work.” Also in July, three powerful unions wrote to the Obama administration complaining that ObamaCare would “destroy the foundation of the 40-hour work week that is the backbone of the American middle class.”
In August, Keith Hall, who ran the Bureau of Labor Statistics from 2008-12, looked at part-time hiring from the end of January through July and told a McClatchy reporter that the results were “really remarkable” and “a really high number for a six-month period. I’m not sure that has ever happened over six months before.”
Not surprisingly, full-time job creation rebounded and part-time employment subsided following the announcement on July 2 that the employer mandate would be delayed for a year. In July and August, the economy lost 20,000 part-time jobs and added 132,000 full-time jobs. While businesses know the administration has put off, not eliminated, the mandate, the clock was reset and the surge in part-time employment subsided.
So Ms. Sebelius was technically correct on “The Daily Show” this week. What she didn’t mention is that part-time hiring will come roaring back when the employer mandate kicks in.
The logic for businesses is simple. If you have three employees working 40 hours per week they will produce 120 labor hours. Five employees working 24 hours per week also produce 120 labor hours. Employers must offer the three full-time employees health insurance or pay a penalty. They have no such obligation to the five part-time employees, making part-time employment less costly. Make something more expensive and employers will use less of it; make something less expensive and they will use more of it.
This unintended consequence of ObamaCare must be addressed. The bipartisan “Forty Hours Is Full Time Act” introduced in the House and Senate earlier this year offers a viable solution. The bill redefines a full-time employee as one who works 40 hours a week or 174 hours a month based on a 52-week year. That change to ObamaCare would encourage economic growth and job creation.
Congress and the administration can solve this problem. A good first step would be for the White House to admit that there is a problem