Obamacare's rules regarding hours worked and employer-sponsored healthcare coverage have entire industries looking at cutting down on their number of full-time employees in favor of more part-time employees.
Large industries affected include hotels, restaurants and retailers, as well as small businesses of all stripes.
In essence, the hefty financial burden imposed by Obamacare for having too many full-time employees is creating a huge incentive for many employers to cut workers' hours, or, in some cases, avoid hiring altogether.
Tens of millions of American workers are at risk of being denied employer-sponsored health insurance as a result, and will end up with less pay to boot.
It could be a disaster for the still-lagging U.S. economy.
"If you want to have reduced work, lower wages and economic stagnation, this is a great way to do it," Ed Haislmaier, a senior research fellow at the Heritage Foundation, told FOX News.
How Obamacare Discourages Full-Time Jobs
In trying to achieve the goal of having health insurance for all Americans, Obamacare – officially known as the Affordable Care Act – created specific requirements for employers.
The Obamacare law says that every employer that has 50 or more full-time employees must offer health insurance to anyone who qualifies as full-time, defined as anyone who works at least 30 hours a week.
A $2,000 a year penalty for not offering health insurance kicks in for small businesses when they hire their 50th employee, but the penalty extends beyond employee No. 50.
That one additional employee triggers a $2,000 a year penalty on every employee above the threshold of 30. So the penalty becomes $2,000 x 20 instead of $2,000 x 1 – the net result being a $40,000 a year penalty.
Of course, every hire after that incurs another $2,000 a year, so adding more full-time employees without offering a health insurance plan can quickly get very expensive.
Yet offering health insurance would be even more costly, so it's easy to see why many businesses are worried.
Franchise industries (like fast-food and restaurant chains) and other small businesses often operate on thin profit margins – the net profit averages 3.5 %.
That's why such businesses have rarely offered healthcare benefits in the first place. They'll do whatever it takes to stay beneath the Obamacare thresholds.
"Many stores will have to cut worker hours out of necessity. It could be the difference between staying in business or going out of business," Stephen Caldeira, president of the International Franchise Association, told The Wall Street Journal.
Obamacare could cost the franchise industry $6.4 billion and put 3.2 million jobs at risk, according to a study done in 2011 by the Hudson Institute.
Meet Obamacare's "49ers" and "29ers"
Many smaller companies have already started to limit hiring to 49 employees to avoid the Obamacare triggers, earning the nickname "49ers."
Meanwhile, service-oriented businesses are seeking to keep work weeks below 30 hours – the "29ers" – because they don't have to offer health insurance to part-time workers.
According to The Wall Street Journal, franchisees of Burger King, McDonald's, Red Lobster, KFC, Dunkin' Donuts and Taco Bell have all started to nudge employees into part-time hours.
They can't afford to wait until the law goes into effect Jan. 1 because Obamacare will base the status of employees on their work schedule in 2013.
Just this week, Regal Entertainment Group, which operates 500 movie houses in 38 states, said it has cut the schedule of thousands of employees to less than 30 hours a week. A company memo blamed the move on Obamacare.
Even some states have shifted their employment policies in response to the Obamacare requirements.
Earlier this year, Virginia Gov. Bob McDonnell told state agencies to reduce hours worked by part-time employees to less than 30 to avoid an estimated increase in annual health insurance costs to the state of $61 million to $110 million.
Lost Pay Will Damage U.S. Economy
The biggest losers here, of course, are the millions of workers affected by these changes.
Their reduced hours will ensure that not only will they be denied employee-sponsored health insurance, they'll also be forced by law to buy health insurance from an Obamacare exchange or face financial penalties themselves.
Worst of all, the reduced hours will mean less pay.
The last thing workers making less-than-average wages need is a pay cut.
Equally concerning is the Obamacare-generated bias toward part-time workers, which we're already seeing.
According to Gallup, part-time jobs have risen from 17.6% of the labor force last July to 20.6% in February. That's an ominous trend.
A rising proportion of part-time workers making less money will put a new drag on the U.S. economy, 70% of which is driven by consumer spending.
When you add in the number of jobs that won't be created because of companies trying to stay below the 50-employee threshold, it's clear that Obamacare is going to be a hard pill for American workers to swallow.
"Democrats who thought they were doing workers a favor by mandating health coverage can't seem to understand that it doesn't help workers to give them healthcare if they can't get a full-time job that pays the rest of their bills," The Wall Street Journal observed in a recent editorial.
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- The Wall Street Journal:
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- FOX News:
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About the Author
Dave has been a journalist for more than 35 years, including 18 spent at The Baltimore Sun. He has worked as a writer, editor, and page designer at different times in his career. He's interviewed a number of well-known personalities - ranging from punk rock icon Joey Ramone to Apple Inc. co-founder Steve Wozniak.
Over the course of his journalistic career, Dave has covered many diverse subjects. Since arriving at Money Morning in 2011, he has focused primarily on technology. He's an expert on both Apple and cryptocurrencies. He started writing about Apple for The Sun in the mid-1990s, and had an Apple blog on The Sun's web site from 2007-2009. Dave's been writing about Bitcoin since 2011 - long before most people had even heard of it. He even mined it for a short time.
Dave has a BA in English and Mass Communications from Loyola University Maryland.