From The Wall Street Journal:
The Full-Time Scandal of Part-Time America
Fewer than half of U.S. adults are working full time. Why? Slow growth and the perverse incentives of ObamaCare.
By Mortimer Zuckerman | July 13, 2014 6:47 p.m. ET
There has been a distinctive odor of hype lately about the national jobs report for June. Most people will have the impression that the 288,000 jobs created last month were full-time. Not so.
The Obama administration and much of the media trumpeting the figure overlooked that the government numbers didn’t distinguish between new part-time and full-time jobs. Full-time jobs last month plunged by 523,000, according to the Bureau of Labor Statistics. What has increased are part-time jobs. They soared by about 800,000 to more than 28 million. Just think of all those Americans working part time, no doubt glad to have the work but also contending with lower pay, diminished benefits and little job security.
On July 2 President Obama boasted that the jobs report “showed the sixth straight month of job growth” in the private economy. “Make no mistake,” he said. “We are headed in the right direction.” What he failed to mention is that only 47.7% of adults in the U.S. are working full time. Yes, the percentage of unemployed has fallen, but that’s worth barely a Bronx cheer. It reflects the bleak fact that 2.4 million Americans have become discouraged and dropped out of the workforce. You might as well say that the unemployment rate would be zero if everyone quit looking for work.
Last month involuntary part-timers swelled to 7.5 million, compared with 4.4 million in 2007. Way too many adults now depend on the low-wage, part-time jobs that teenagers would normally fill. Federal Reserve Chair Janet Yellen had it right in March when she said: “The existence of such a large pool of partly unemployed workers is a sign that labor conditions are worse than indicated by the unemployment rate.”
More at the original, but I do want to quote one more paragraph, slightly further down:
But there is one clear political contribution to the dismal jobs trend. Many employers cut workers’ hours to avoid the Affordable Care Act’s mandate to provide health insurance to anyone working 30 hours a week or more. The unintended consequence of President Obama’s “signature legislation”? Fewer full-time workers. In many cases two people are working the same number of hours that one had previously worked.
Way, way back in the late 90s, I was part of a company management meeting where the Vice President was trying to cut overtime, saying that if a man worked 67½ hours, it would be less expensive for the company to have a second employee working 40 hours, and the first man held to 40. Well, that was over-simplified, due to the fixed costs of the second employee, primarily the health insurance plan, though there were other things. Nothing was ever done to meet the Vice President’s objections, because workers in ready-mixed concrete have come to depend on overtime, and cutting back those workers to 40 hours, and adding replacement workers to cover the hours beyond 40 would mean a loss of the most skilled and valuable men.1
But what Mr Zuckerman is noting is a statistical trend which indicates that that Vice President’s thinking is being employed in a different manner: it’s not the denial of overtime work, which results in wage savings due to not having to pay time-and-a-half, but the avoidance of having to provide health insurance for these employees. The Kaiser Family Foundation reported that, in 2013, the average cost of employer-sponsored family health insurance coverage was $16,351, of which $4,565 pas paid by the employee, normally by payroll deductions, and the remainder, $11,786, was paid by the employer.2 Given that most of the jobs which can be kept part-time are lower-skilled, higher turnover jobs,3 essentially the type we think of as near minimum wage jobs, providing health insurance is effectively a 43% increase in per hour labor costs.4 As long as employers are restricting such thinking to the most quickly trained and easily replaced workers, it makes perfect economic sense to do just what Mr Zuckerman has pointed out.
In one way, the Obama Administration’s policies have exacerbated the very income inequality problems about which it complains. In yet another article, the Journal noted that many small businesses are having a difficult time finding good employees in the higher job skill positions. Those are the positions for which there will be no questions at all concerning whether companies provide health insurance: they are competing for a too-small labor pool, and providing health insurance coverage is just plain required to hire such people. Thus, the Patient Protection and Affordable Care Act has led to the (apparently) unintended consequence5 of widening the wage gap, not narrowing it. It doesn’t require a PhD in economics to see and understand that, but it does, seemingly, require having more economic and common sense than is possessed by the Obama Administration.
- I have been a salaried employee through almost all of my twenty-eight years in this business, so it wouldn’t have included me. ↩
- Economically, I would argue that it was all paid by the employee, in that the employer’s portion of health insurance really constitutes part of the employee’s total compensation. However, this arrangement means that employees are receiving, in effect, $11,786 in untaxed wages, and that untaxed portion means untaxed throughout the income and wage tax systems, federal, state and municipal. To show this effective $5.67 per hour wage (based on a 40 hour week) as part of salaries and wages would mean a huge tax increase, throughout all levels of government, on employees. ↩
- The Journal also noted the decrease in job turnover, which not only has depressing effects on the wages of entry-level workers, but reduces turnover costs for the employers of low-skilled workers. ↩
- This assumes the current minimum wage of $7.25 per hour, plus the effective $5.67 per hour cost, at full time, for employer-provided health insurance, using the averages reported by the Kaiser Foundation. Different companies would see different figures, but the averages illustrate the point sufficiently. ↩
- Have there been any actually intended consequences of Obama Administration policies? ↩