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The Biggest Economic Story of 2013

March 29, 2013, 3:01 pm

Frequent readers will know that last year, I declared that the end of full-time employment in the American service industry (due to Obamacare) would be the biggest economic story of 2013.  The mainstream media either has not yet noticed or cannot be bothered with a story that does not put Obama in the best possible light, but the story is starting to get out none-the-less.

Expect a lot more of this.  The service industry generally does not operate 8 hours a day, 5 days a week anyway, so its labor needs do not match traditional full-time shifts.  Those of us who run service companies already have to piece together multiple employees and shifts to cover our operating hours.  In this environment, there is no reason one can't stitch together employees making 29 hours a week (that don't have to be given expensive health care policies) nearly as easily as one can stitch together 40 hours a week employees.   In fact, it can be easier -- a store that needs to cover 10AM to 9PM can cover with two 5.5 hour a day employees.   If they work 5 days a week, that is 27.5 hours a week, safely part-time.  Three people working such hours with staggered days off can cover the store's hours for 7 days.

Based on the numbers above, a store might prefer to only have <30 hour shifts, but may provide full-time 40 hours work because good employees expect it and other employers are offering it.  But if everyone in the service business stops offering full-time work, there will be no reason not to go to such a plan, and thousands of dollars per employee to do so.

Tags: , ,
Category: Health Care, Regulation

24 Comments

  1. Bryan:

    Did you get an error uploading this post? My RSS feed has an extra half sentence tacked on to the end.

    .....and thousands of dollars per employee to do so.By the way, I am already exhausted by the excuse that, "sure this was not intended." Perhaps not. But legislators had every opportunity to look to examples in Europe to see t

    March 29, 2013, 3:23 pm

  2. AnInquirer:

    The government does have a measure of part time employment as a percentage of total employment. And the surge in part time employment is why we got below 8% unemployment. I am interested in useful observations -- with links to reliable data -- on the trends and magnitude in part-time employment.

    March 29, 2013, 3:44 pm

  3. BGThree:

    I demand a federal law making it illegal to reduce workers' hours in order to avoid providing insurance. Either that or a law that makes it illegal to not provide insurance to workers no matter how few hours they work. Vive le France!

    OMG. #JustHours is a thing now?!? #JustKillMeNow

    March 29, 2013, 3:54 pm

  4. bigmaq1980:

    "Expect a lot more of this"

    I hope...so folks see cause and effect.

    But will they learn their lesson, or simply demand that businesses provide insurance for all employees? (or worse, government should directly supply to all!).

    March 29, 2013, 4:03 pm

  5. Rick C:

    Let's do what people in New York City are talking, and, in addition to demanding employers provide 40-hour jobs, that they also be forced to provide paid time off, even to part-timers!

    March 29, 2013, 4:29 pm

  6. Jaycee:

    Is there an opportunity here for job sharing? Two retail outlets next door to each other employ each other's employees for 20 hours a week each?

    March 29, 2013, 5:23 pm

  9. Not Sure:

    People seem to be finding out that sometimes, it sucks when you get what you ask for.

    March 29, 2013, 7:44 pm

  11. FelineCannonball:

    Call me an obamacare theory skeptic. I think it's sunspots: http://mpra.ub.uni-muenchen.de/40271/1/MPRA_paper_40271.pdf

    March 30, 2013, 9:10 am

  12. morganovich:

    fewer hours of work but hey, you're going to LOVE being required to buy MUCH more expensive health insurance or get fined. yup, it's the days of wine and roses for these young folks. of course, instead of realizing they made a terrible mistake, they will then simply try to legislate care requirements for even pt workers and if they succeed, start seeing themselves get fired in droves.

    March 30, 2013, 9:50 am

  13. jdgalt:

    I don't think this workaround will work, because the penalty for not providing health coverage is based on the number of "full time equivalent" employees on the company's payroll. 500 employees who work 29 hours each would count as (500 x 29/30) "full time equivalents" and would still subject you to the penalty.

    If I owned a restaurant or retail chain and wanted to avoid this law, then, I would spin off any stores that the chain owns directly into separate companies and call them franchises. (I might also have to sell off at least part-ownership in the franchises; merely making them separate companies but continuing to own them might be considered a sham transaction by tax authorities, but that's a lawyer question and I'm only a tax professional.)

    March 30, 2013, 12:19 pm

  14. jdgalt:

    France is a much more advanced example of the same kind of feedback. Their sweeping laws making it very hard to lay off a permanent employee have caused a huge rise in temporary contract jobs which don't carry the protection.

    Make that illegal and most of the economy will simply go "informal", thus creating huge opportunities for corrupt police to extort businesses. This has always been the norm in Latin America and is why those countries are poor.

    March 30, 2013, 12:37 pm

  15. Ted Rado:

    Warren
    You are a dreamer if you think the Feds will allow this. As soon as people start part-timing their help, they will switch from 30 hrs per week to 20, 10, or whatever it takes to screw you. Lots of luck on the freeway!!

    March 30, 2013, 1:03 pm

  16. MingoV:

    The government already has. The IRS (that, for unknown reasons, runs the employer compliance part of ObamaCare) plans (without Congressional approval, naturally) to use employers' 2013 full-time employee numbers as the basis for determining 2014 status. This plan may not be implemented, but not for lack of trying. (It probably would be overruled by a federal court, but that could take years.)

    The Congressional Democrats running for re-election in 2014 will be shaking in their boots because so many people will be pissed about losing work hours and having to pay huge premiums for health insurance that meets ObamaCare requirements. Unfortunately, these Congresspersons will modify ObamaCare instead of killing it.

    March 30, 2013, 3:03 pm

  17. MingoV:

    The main reasons why we got below 8% unemployment:

    1. Only people collecting unemployment benefits are counted. If you lost a job and used up your benefits, you're not counted as unemployed. If you're a high school or college grad who didn't get a job, you're not counted because you were not eligible for unemployment insurance. If you were out of the workplace for a while and want to get back in (such as a mother whose kids are grown), you're not counted as unemployed.

    2. In Obama's first term, around one million people became eligible for Social Security Disability. Most became eligible right after their unemployment payments ran out. Most claimed back injury or depression as their disability, two conditions that cannot be disproved by exams or tests.

    3. A part-timer worker who wants a full-time job is counted as an employed person instead of 0.5 or 0.6 of an employed person.

    March 30, 2013, 3:11 pm

  18. David:

    I thought there was something like that, although I suspect that it may be that you have to provide some things only to the actual FT employees, but are subject to the ACA for having more than 50 FTE. I'm not sure, because I don't run a business, and don't want to read 10000 pages to figure it out.

    March 30, 2013, 7:14 pm

  19. AnInquirer:

    JDGault, you are right that this will be one of the consequences -- I do not know how often it will be that companies restructure to keep below 50, but it will often enough that the static models producing half-rosy pictures of Obamacare will turn out looking ridiculous. A couple of decades ago, the federal government put a cap of $50,000 as the max that a farm could receive in federal aid; therefore, a farmer split his farm into ten farms. One owned by him; one owned by his wife; one owned by him and his son; another owned by his wife and son; another owned by all three; another . . . til ten farms were formed. If farmers can do, I am sure that many businesses can do it.

    March 30, 2013, 8:09 pm

  20. AnInquirer:

    MingoV, I am afraid that you are a bit off. The unemployment rate does not come from measures on unemployment benefits. Rather, it comes from a random survey of 60,000 households.
    You are indeed right about Social Security Disability. The surge in Social Security Disability is probably the key reason why unemployment rate is less than 10%.
    To get below 8%, there was a surge in September of part time workers -- especially among 19-25 year olds. It was obvious that something fundamentally changed: perhaps these youth are now getting part-time jobs in unprecedented numbers; or perhaps some college kids remembered their part-time jobs in the survey so they could help Obama's economic performance; or maybe the surveyors -- who are essentially not monitored -- reminded these youth that they did have such jobs.
    In any case, there is data available on part time work, but I have not seen a well-researched study on the trends and composition of the part time work.

    March 30, 2013, 8:17 pm

  21. Eris Guy:

    So Obamacare, with its division of labor among part-time* employees and its supply of health care to everyone, is similar to increasing employment by using ineffective tools**.

    * in a world without employer-supplied health care and other benefits, the distinction between full- and part-time disappears. All employees are contracted for specified hours. Very Libertarian.

    ** dividing up employment among more employees is like doubling the number of loggers by having them use rusty saws.

    March 31, 2013, 5:05 am

  22. Berourke:

    I have long had a problem getting young employees to work all the hours assigned. Mondays and Fridays seem to have particularly strong instances of "stomach flu." I wanted to offer health insurance years ago, when it was still affordable, but couldn't figure out how to handle employees who may work 20 hours this week and 50 hours next week without a massive accounting headache. It was always funny to me that the employees that asked about health Insurance the most were the ones with the worst attendance ( and no, it wasn't because they were sick). Many employees seem to choose to think that health Insurance doesn't cost much, if anything, and that I am just a jerk for not giving it to them. My favorite was an employee who asked who this "FICA" was that was taking all of his money- I told him that paid for some of the "free" stuff he gets from the government - he then said "but that means it's not free," "exactly" I said.

    March 31, 2013, 6:52 am

  23. nnu-16121:

    What I've been able to glean from the HR-oriented publications is that employers are not required to provide a health-care plan to part-time employees. If if all of the full time employees are provided with a health care plan, then all is good legally.

    But if even one 30-hour+/week employee goes to get insurance from the exchange, then the penalties kick in, and number of FTE employees is part of the penalty calculation

    March 31, 2013, 1:50 pm

  24. Sandro Rettinger:

    My favorite was an employee who asked who this "FICA" was that was taking all of his money -

    I told him that paid for some of the "free" stuff he gets from the government -

    he then said "but that means it's not free,"

    "exactly" I said.

    Was there a lightbulb, or just a confused look?

    April 1, 2013, 9:21 am