Is Obamacare a job-killer?

MoneyWatch/ July 26, 2013, 7:00 AM

By Alain Sherter

(MoneyWatch) As Republicans in Congress continue trying to dismantle the Affordable Care Act, perhaps the most serious charge leveled against the health care law is that it is a "job-killer."

Critics say the ACA requirement that companies provide employees with health insurance is deterring employers from hiring and has slowed the recovery. Small businesses are particularly vulnerable, unable to afford the higher costs or the financial penalties for failing to offer health benefits, they contend. In a characteristic attack, Rep. Randy Forbes, R-Va., wrote in an editorial earlier this month that Obamacare "creates incentives to not hire new workers and cut back the hours employees are allowed to work."

But experts and some small business advocates rebut such claims. Economist Dean Baker said there is no evidence that the ACA has noticeably affected hiring. "There's a lot of confusion with regards to the ACA, so you probably do have employers that think it affects them in ways that it really doesn't," said Baker, co-director of the liberal-leaning Center for Economic and Policy Research, a Washington think-tank.

One reason to think Obamacare isn't doing much to stifle job-creation: More than 9 out of 10 businesses subject to the law already offer health coverage, while companies with fewer than 50 employees are exempt (About 60 percent of these smaller firms offer health insurance, and under the ACA they also may qualify for a tax credit for offering coverage.) Of the 28 million small businesses in the U.S., 96 percent won't be subject to the rules, according to the U.S. Small Business Administration.

Meanwhile, relatively few of the roughly 4 percent of smaller firms that fall under the ACA are around the 50-employee threshold. Baker notes in a research brief that no more than about 1 percent of job growth this year would come from employers whose headcount puts them near that statutory cutoff.

In short, the health law is a non-issue for the vast majority of small businesses. And while some of these employers may ultimately choose to curb hiring or even shed workers to stay below 50 employees, such firms are too few to make much of an impact on overall hiring or economic growth.

The view that Obamacare threatens smaller companies is "strictly a talking point by those who want to kill off the ACA," said Frank Knapp, head of the South Carolina Small Business Chamber of Commerce. "We're not going to hurt the economy. If we have more people with health insurance, we're going to reduce the cost of health insurance for most people."

The ACA defines a full-time worker as one who works at least 30 hours a week. So what of the claim that many employers are cutting employee hours so they don't qualify for health benefits? In examining U.S. Census data, Baker and economist Helene Jorgensen found that employers haven't rushed to shift workers to shorter schedules this year. In fact, fewer people -- 0.6 percent of the U.S. labor force, or less than 1 million people -- worked just under the 30 hour per week threshold this year than did so in 2012.

If many companies had been slashing employee hours this year in anticipation of ACA penalties taking effect, the number of workers being shifted to shorter schedules should be rising sharply. For now, that doesn't appear to be happening.

"While there may be some employers who make a show of cutting worker hours to just below the 30-hour threshold, this is clearly not a widespread phenomenon affecting large numbers of workers," Baker and Jorgensen wrote in a research brief.

Another reason to question the depiction of Obamacare as a job-killer: Some surveys show hiring by small businesses picking up, a sign companies aren't slimming down ahead of the ACA going into force. Employers with fewer than 50 workers added 84,000 jobs in June, according to payroll processors ADP, the biggest gain among small business since February.

That hiring spurt came before the White House said on July 2 that it was postponing the employer mandate to offer health insurance until 2015. In other words, many smaller firms boosted hiring even before the Obama administration delayed the sanctions for failing to comply with the ACA.

Ken Esch, a partner with management consultant PwC, said small businesses are much less apprehensive about Obamacare than when the president signed it into law in 2010.

"Initially when the Act came out there were expectations that there were going to be significant changes in the types of health benefits," he said. "But once businesses started to analyze those benefits and compare them to their existing plans, they found that they weren't going to have to make that many changes. They have to adapt here and there, but there are no wholesale changes."

As a result, only 3 percent of private businesses plan to drop coverage because of the ACA, while a scant 1 percent expect to trim their payrolls to fewer than 50 workers, according to a recent survey by PwC. Many employers are also holding off in making decisions about their health plans until the law takes effect and its economic implications for companies are clear, Esch said.

If small businesses don't seem to be running scared of the ACA, there remains considerable uncertainty about how the law will work in practice. The economy is slowly improving, but many small businesses are still struggling.

"Small business continues to be in an economic holding pattern," William Dennis Jr., a senior research fellow at the National Federation of Independent Business, said in a Senate hearing Tuesday on the impact of Obamacare on small businesses. "Economic activity remains tepid. Plans to invest and hire remain low by historical standards."

Still, most small business owners are far more focused on the usual rigors of running a company than on Obamacare, said Knapp, who is also co-chair of the ASBC Action Fund, a policy advocacy group. As ever, the top priority remains getting customers in the door.

"The ACA is no different than other laws -- some will try to find their way around it," he said. "But the vast majority of small businesses are going to hire the people they need to serve the customers they have to in order to make money."

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