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Thursday, September 15, 2011

Does ObamaCare Discourage Full-Time Employment ?

So argues Diana Furchtgott-Roth in her REAL-CLEAR MARKETS piece, Slow Employment Growth? Look to Obamacare, excerpted below. 

The disincentive in the [2010 Patient Protection and Affordable Care] Act to hire additional workers is a matter if simple arithmetic. If a business does not offer health insurance, then, beginning in 2014, it will be subject to a tax if it employs more than 49 workers in all its establishments. For 49 workers, the tax is zero. For 50 workers, the tax is $40,000, since the business does not pay the tax on the first 30 workers. For 75 workers, it is $90,000; and for 150 workers, the tax is $240,000. Each time a business adds another employee, the tax rises.

Employers will be forced to decide whether the tax rate, $2,000, is less than the cost of health insurance-as is entirely possible in today's market.

Alternatively, businesses can reduce costs by substituting part-time workers for full-time workers.

A firm with 55 full-time workers and 7 part-time workers that does not offer health insurance would pay a tax of $50,000. By keeping the number of hours worked the same, reducing full-time workers and increasing part-time workers, until the firm reaches 49 full-time workers and 19 part-time workers, the tax would be completely eliminated.

In order to avoid the tax, it would pay firms to share employees so they worked fewer than 30 hours at each place of employment. Firms also have an added incentive to become more automated, to use more machinery and employ fewer workers.

Unemployment is stubbornly high, and employers show little willingness to hire. It's time for President Obama and Congress to review the new health care law to see if it may be more of a problem than a solution to securing America's future.

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