June 11, 2015

Obamacare: A Disaster for Younger and Lower-Wage Workers


  • Obamacare is forcing employers to cut jobs and move full-time workers to part-time jobs.

  • New data show a decline in the average hours worked per week by lower-wage employees and many more working just below 30 hours per week.

  • 2.6 million people are at risk of having their work hours cut. Sixty-three percent of the people most at risk are female, and nearly 60 percent are 19-34 years old.

  • CBO projects Obamacare will reduce employment by two million full-time jobs in 2017.


On June 7, Hillary Clinton told a conference of fast food workers that she supported their push for a $15 minimum wage, saying, “I want to be your champion.” Instead of addressing failing government programs that harm lower-wage workers, Clinton promises to pile higher costs on their employers. The predictable result would be significant harm – in the form of reduced jobs and fewer opportunities for the people Clinton purports to help. To help fast-food workers and keep prices lower for customers, Clinton should reconsider her support of Obamacare, particularly its employer mandate. This provision levels high penalties on businesses with at least 50 full-time-equivalent workers that fail to offer Obamacare-compliant insurance to all their workers who clock more than 30 hours per week.

Obamacare At Risk PopulationSource: Hoover Institution

Today, Investor’s Business Daily reported on new data showing a shrinking average number of hours worked per week by lower-wage workers. Since December 2012, the number of workers usually clocking 25-to-29 hours a week has grown by 12 percent, and the number of workers usually clocking between 31-to-34 hours per week has declined by seven percent. This should not come as a surprise. Restaurant owners have been clear that Obamacare forces them to reduce hiring and move full-time workers to part-time jobs to avoid the expensive employer mandate tax penalty. One restaurant owner put it this way in congressional testimony in March of 2012:

Obamacare “explicitly makes labor more expensive. It is completely predictable that businesses such as ours will search for ways to take jobs out of our existing restaurants to reduce that expense. ... We would undoubtedly increase the number of part-time employees; decrease the number of full-time employees and attempt to automate positions (such as replacing cashier positions with ordering kiosks). These are not actions we would choose to take. They are actions [Obamacare] will all but compel us to take.”   

Obamacare Destroys Jobs in Several Ways

Obamacare reduces work in three primary ways. First, the employer mandate makes full-time workers, principally younger and less-skilled workers, more costly to hire by requiring employers provide expensive Obamacare-compliant insurance. Second, it discourages work because the law’s subsidies get much less generous as people earn more income. Third, its tax increases total more than $1 trillion over the next decade, reducing economic growth, wages, and work.

  • At least 450 employers, including 100 school districts, have announced that Obamacare caused them to cut positions or reduce worker hours.
  • The Congressional Budget Office projected in February 2014 that Obamacare will reduce employment by two million full-time jobs in 2017 and by 2.5 million full-time jobs by 2024.
  • Last year, one University of Chicago economist estimated that Obamacare will cause a three percent drop in employment and work hours (equal to about four million fewer full-time workers), and a two percent drop in GDP and worker income. The total loss in worker compensation would exceed $2 trillion between 2017 and 2024.
  • CBO found in September 2014 that the magnitude of part-time unemployment resulting from workers’ inability to find full-time jobs remains much higher than it was before the recession.
  • In January 2014, researchers at the Hoover Institution estimated that 2.6 million workers are at risk of having their hours cut because of the Obamacare’s 30-hour work week rule. According to their study, 63 percent of those most at risk are female, and almost 60 percent are between the ages of 19 and 34.
  • A non-partisan data analysis by the blog Fivethirtyeight.com in January of this year concluded that “the health law has likely led a few hundred thousand workers to see their hours cut or capped. … Most of them are among the economy’s most vulnerable: low-wage, part-time workers who likely have few other options.”

Supreme Court Ruling May Bring Some Relief

By the end of June, the Supreme Court is expected to rule in the case King v. Burwell. The main issue in the case is the legality of an IRS decision to issue subsidies to people purchasing insurance through the exchange established by the federal government. The law linked the availability of subsidies to tax penalties under the law’s individual and employer mandates. The employer mandate is only triggered for a business if at least one worker receives a subsidy, so a ruling that the IRS regulation is unlawful would invalidate the employer mandate in the states that did not establish an exchange. The American Action Forum estimates that 262,000 businesses would be freed from the employer mandate in these states. Nearly 1.3 million people would be added to the labor force, and workers at small and medium-sized firms could receive pay raises of up to $940.

Issue Tag: Health Care