Yes, Some Companies Are Cutting Hours In Response To ‘Obamacare’

On Friday, I posted this chart, showing that nearly all the job growth since the recession ended has been in full-time jobs. Part-time employment is pretty much flat.

I wasn’t trying to make a political point, but many readers saw one anyway. Specifically, they saw it as a refutation of a frequent Republican talking point: that the Affordable Care Act, or “Obamacare,” is killing full-time jobs because it requires employers to offer health insurance to their full-time (but not their part-time) workers.

The reality, though, is a bit more complicated. Obamacare hasn’t led to a shift from full-time employment to part-time. But the evidence suggests it has led some employers to limit the hours of workers who were already part-time, effectively giving a pay cut to some of the most vulnerable Americans.

For those who haven’t been following this debate closely, here are the basics: The 2010 health law requires large employers to offer health insurance to anyone working “full-time,” which the law defines as 30 hours a week. Republicans argue that’s leading companies to cut workers’ hours in order to stay under the threshold. On Thursday, as one of their first acts in the newly inaugurated Congress, Republicans in the House voted to redefine “full-time” employment under the law as 40 hours a week instead of 30. The bill now heads to the newly Republican-controlled Senate. (The White House has said President Obama will veto the bill if it gets that far.)

Democrats — and even some Republicans — have argued that the bill doesn’t make much sense. Far more Americans work 40 hours a week than 30, so raising the bar would likely put more workers at risk of having their hours cut.

But set aside that debate and start with the basic factual question: Are Republicans right that employers are capping workers’ hours to avoid offering health insurance? The evidence suggests the answer is “yes,” although the number of workers affected is fairly small.

To figure this out, we can look at the Current Population Survey, the same monthly survey that the Bureau of Labor Statistics uses to calculate the numbers in the chart above. The BLS numbers, though, have two big problems if we’re interested in the impact of the Affordable Care Act. First, the BLS draws the line for “full-time” at 35 hours a week instead of 30. Second, the BLS is counting workers, not jobs — so someone working two 20-hour-a-week jobs would be counted as a full-time worker.

Fortunately, the survey includes a question asking workers how many hours they spend at their “main job.”1 That means we can look at whether there’s been any shift in workers’ hours around the 30-hour threshold.

Sure enough, there has been. As the chart below shows, the share of part-timers2 working just below 30 hours a week has been rising for roughly the past two years, while the share working just over 30 hours has been falling. (The share working exactly 30 hours has risen a bit too, but that’s harder to interpret since people who work 29 or 31 hours might round to 30 when they answer the survey.3)

A few notes about that chart. First, it shows only the people most likely to be affected by the 30-hours threshold, those who work between 25 and 35 hours a week. That excludes the vast majority of workers. About 80 percent of hourly employees work at least 35 hours a week and the health law has had no measurable impact on their working hours. That makes sense: Cutting back workers from 40 hours to 29 would be highly disruptive for most businesses. And in any case, most of them already get health insurance.4

Second, even focusing just on the most affected workers, the impact has been small. In 2009, before the Affordable Care Act was passed, 9.7 percent of part-timers worked between 25 hours and 29 hours and 7.7 percent worked between 31 and 34. In 2013, those numbers were 11.1 percent and 6.6 percent, respectively.5

Third, there’s no way to say for sure whether the shift is due to the Affordable Care Act. It’s hard to disentangle the effects of the law from the effects of the recession and economic recovery, for example. But the timing is suggestive: The change in working hours appears to hit in the middle of 2013, as the major components of the law were beginning to take effect.6

Other evidence also supports the idea that at least some employers are capping workers’ hours in response to the law. Average weekly hours are rising in the economy as a whole, but are falling for workers in many of the sectors most likely to be affected by the Affordable Care Act’s employer mandate — industries with lots of low-wage, part-time workers who historically haven’t been offered health insurance. There’s also ample anecdotal evidence: Jed Graham at Investor’s Business Daily has been collecting examples of employers that say they’re cutting workers’ hours because of the mandate.7 Overall, workers in low-wage sectors have seen their hours cut significantly since the recession ended.8

Taken together, the evidence suggests that the health law has likely led a few hundred thousand workers to see their hours cut or capped. That’s small in the context of an economy with 150 million workers. But it isn’t a minor issue for those workers. Most of them are among the economy’s most vulnerable: low-wage, part-time workers who likely have few other options.

The health law may also be having a separate, more positive impact on working hours: It may be allowing some people who want to work part-time to do so. Before the law, the only way for most working-age Americans to get health insurance was either to work a job that offered it (which usually meant working full-time) or to have a spouse who did so. Now, the health care exchanges created under the law have made insurance available outside of work, while Medicaid eligibility has been expanded in many states. That means some people who were working full-time only to qualify for benefits, such as parents or people nearing retirement age, have the option of working part-time and getting insurance through the exchanges or Medicaid.

The Congressional Budget Office, in a report before the law had fully taken effect, estimated that millions of Americans would voluntarily shift to part-time status once they no longer needed to work full-time to qualify for health benefits.9 It’s hard to know exactly how many have already done so. But there has been a marked increase in recent months in the number of people reporting they are working part-time by choice. It’s possible, as liberal economist Dean Baker has suggested, that this rise reflects the effect of the health law.

None of this gets at the deeper question of whether the employer mandate, or the Affordable Care Act more broadly, is good policy. Many of the low-wage workers whose hours are getting cut are also getting access to health insurance for the first time; whether that tradeoff is a good one depends heavily on an individual’s circumstances. For the economy as a whole, meanwhile, the employer mandate simply isn’t that big a deal; other elements of the law, especially the “individual mandate” that requires most adults to have health insurance, are much more significant. And to the extent the employer mandate does have negative effects, it isn’t clear that raising the bar to 40 hours a week would help; it might actually make the situation worse by encouraging employers to cut the hours of the far larger group of Americans who work at least 40 hours a week. But on the basic factual question, it does appear that some employers are reining in workers’ hours to stay under the 30-hour cap.

Footnotes

1. The survey asks two separate questions on this: How many hours did you actually spend at work last week, and how many hours do you usually work in a week? In this analysis I use the “usual” series, which is less volatile and better reflects people’s scheduled hours (as opposed to time they miss due to sickness, weather, etc.).
2. Defined as anyone working under 40 hours a week.
3. The Census Bureau, which conducts the survey, also rounds responses to the nearest hour. That seems unlikely to have a big effect on the overall data, however, since most employers schedule shifts for full hours anyway.
4. Another 10 to 12 percent work less than 25 hours a week. That work follows a clear seasonal pattern, spiking late in the year as retailers and other businesses staff up for the holiday season. That group, too, shows no change in trend since the health law.
5. 2014 figures are through November.
6. The so-called employer mandate, which requires companies to offer insurance to full-time workers, was initially scheduled to take effect in 2014, but that deadline was pushed back to 2015 or 2016, depending on the size of the employer.
7. This kind of self-reporting is clearly imperfect. Some employers may have incentives to criticize the law, while others might see it as a convenient excuse for cuts they would have made anyway. I certainly wouldn’t base a conclusion on anecdotal evidence alone. But Graham’s list is large and detailed enough that it provides supporting evidence.
8. The Bureau of Labor Statistics provides its main earnings data at the industry, not individual, level. For the purposes of this chart, “low-wage” industries are those with an average hourly wage for non-managers of less than $15 an hour, high-wage sectors are those that pay more than$25 an hour, and mid-wage sectors pay somewhere in between. The industries are weighted by their share of total employment.
9. The CBO estimates that the law will lead to a reduction in full-time work equivalent to about 2 million full-time workers in 2017 and about 2.5 million in 2024. The CBO didn’t try to estimate the number of individual workers who would cut back their hours.

Ben Casselman is a senior editor and the chief economics writer for FiveThirtyEight.