Say you’re an employer with an employee who works 30 hours a week. If you have 50 employees or more come next year, you’ll be required either to provide her with health-care coverage, which the Affordable Care Act will by then mandate for all employees who work at least 30 hours a week, or you’ll have to pay a $2,000 penalty for failing to cover her.
Or, you could just cut her weekly hours to 29. That way, you won’t have to pay a dime, in either insurance costs or penalties.
This thought, not surprisingly, has crossed the minds of quite a number of employers. Right now, the average number of hours an employee in a retail establishment works each week is 31.4. And a whole lot of Americans work in retail—just slightly over 15 million, according to the latest employment report, out Friday, from the Bureau of Labor Statistics (BLS). Not all of them work hours that hover just over 30, of course, but the UC Berkeley Labor Center has calculated that 10.6 percent of workers in retail establishments that employ 100 or more individuals put in between 30 and 36 hours each week. As retail establishments that employ between 50 and 100 workers may well employ a higher percentage of part-timers than their larger counterparts, that figure of 10.6 percent is likely to rise when those additional employees are factored in.
Any way you slice it, there have to be millions of American workers who are likely to see their weekly hours cut below 30 as employers respond to the mandates of the Affordable Care Act. The BLS tells us that the average number of hours worked weekly in the “education and health services” sector—a catch-all category whose 20.6 million workers range from Harvard professors to home-care workers—is 32.9. According The Los Angeles Times in a story last Thursday, “colleges are reducing courses for part-time professors to keep their hours down and avoid paying for their health premiums.”
Indeed, not all the employers cutting back their workers’ hours are found in the private sector. At the direction of Bob McDonnell, Virginia’s Republican governor, the state has a new policy stipulating that its part-time workers can work no more than 29 hours a week. McDonnell’s office says that more than 7,000 workers will see their hours reduced by virtue of the new rule. Nor is it just Republican-controlled governments that are reducing workers’ hours. Long Beach, California, a solid-blue Democratic city, is “limiting most of its 1,600 part-time employees to fewer than 27 hours a week” in response to the law, the L.A. Times reports.
All is not lost for workers whose hours have been reduced by employers not willing to cover them or face a fine. The Affordable Care Act was enacted in large part to enable such workers to obtain the governmentally subsidized insurance available though the new health exchanges. But even if they are able to get affordable coverage through these exchanges—as millions likely will—the take-home pay for many will still have been reduced due to the cutback in their hours.
The underlying problem here is the longstanding and uniquely American practice of making most health coverage contingent on employer provision. More particularly, it’s making most health coverage contingent on employer provision at a time when the number of part-time workers and self-employed workers is on the rise, at a time when labor-force participation continues to decline, and at a time when the number of hours that employed Americans work continues to fall. Each of these four trends cuts into the number of Americans who receive health insurance from their employer.
Labor force participation now stands at 63.3 percent of Americans between the ages of 16 and 64—the lowest it’s been since women increased their work force participation in the 1970s. It has declined steadily throughout the current “recovery.” The share of Americans workers who work part-time has risen from 17 percent when the recession began to 19 percent today, not because people are electing to work fewer hours (the number of people working part-time “for noneconomic reasons” has fallen by more than half-a-million since 2007) but because the jobs employers are adding are disproportionately part-time.
Partly due to these developments, the length of the average workweek in Friday’s BLS report fell to 34.4 in April from 34.6 in March. Opponents of the Affordable Care Act, such as The Wall Street Journal’s editorialists, place the blame for the rise in part-time employment on the ACA’s 30-hour cut-off. But the length of the average workweek has been declining for decades. In 1966, the average workweek was 38.7 hours. It has been in a slow, steady fall since then, as employment in manufacturing has waned and employment in stores, restaurants and fast-food joints has waxed. The average workweek in manufacturing this April was 40.7 hours, but employment in manufacturing is close to half its level in the mid-20th century. In retail, as I’ve mentioned, the average workweek was 31.4 hours this April. In “leisure and hospitality”—BLS-speak for hotels and restaurants—it was 26.1, and this is a sector that continues to grow, both in raw numbers and as a share of the overall economy.
What all this means is that linking legally mandated health coverage to employment over a certain number of hours probably hastens the long-established trend in the U.S. economy to reduce employees’ hours and pay. To be sure, it sets up a counter-incentive for employers as well: Engendering the employee’s ill-will. But whether the cost of that ill-will will exceed the $2,000 penalty the employer would pay for not insuring that worker if she put in more than 30 hours a week is a judgment call. I suspect many employers will take the ill-will and hang on to the $2,000.
The Affordable Care Act is structured with the anticipation that workers who don’t get coverage on the job will be able to afford it on the exchanges. It’s not structured, however, to enable those workers whose hours have been cut by employers avoiding the strictures of the Act to recoup their lost pay. That’s not a deficiency of the Act per se; it’s a problem inherent in our not having a single-payer system that breaks the arbitrary link between employment and health insurance. President Obama has said that if he could devise a system from scratch, he’d prefer single-payer, but as events would have it, we have a trillion-dollar employer-based private health insurance industry already in place. The fact that employers in both the private- and public-sectors are now cutting their workers’ hours to game that system is just further confirmation of how dysfunctional and cruel that system really is.