How Many Jobs Does ObamaCare Kill?
We surveyed managers at small businesses and put the count at 250,000.
By Casey B. Mulligan
The Wall Street Journal
July 6, 2017
Democrats loudly complain that people will lose health insurance if the Affordable Care Act is repealed. They never mention those who lose jobs because the ACA remains.
The ACA includes a penalty on employers that fail to provide “adequate” insurance for full-time workers. Thanks to the ACA, hiring the 50th full-time employee effectively costs another $70,000 a year on top of the normal salary and benefits.
Many business owners have described how this penalty prevents them from hiring and has caused them to reduce work hours to below the full-time threshold. ACA supporters dismiss these statements as “mere anecdotes” not corroborated by national sampling and statistical analysis. But did any of them rush out to gather the national samples, especially after Jan. 1, 2016, when the employer penalty took full effect?
In partnership with the Mercatus Center at George Mason University, in March 2017 I was able to commission Hanover Research to survey small businesses nationwide regarding their hiring and compensation practices. The result was a sample of 745 small businesses, representing every major industry and together employing almost 50,000 people.
We asked managers (almost evenly divided between Democrats and Republicans) how many people each business employed and whether it offers health insurance. Many businesses, when they do not offer coverage, keep their payrolls just below 50 full-time employees and thereby narrowly escape the ACA’s penalty. This pattern is not visible among businesses that offer coverage.
When we followed up, the businesses employing just fewer than 50 often said the ACA caused them to hire less and cut hours below the full-time threshold. The penalty caused payrolls to shrink or prevented them from growing.
Nationwide, we estimate the ACA-inspired practice of keeping payrolls below 50 has cost roughly 250,000 jobs. This does not count jobs lost when businesses close (we didn’t survey closed businesses) or shrink because of other ACA incentives.
The tally of lost jobs is bound to grow because the penalty itself automatically grows and the IRS is still learning how to enforce it. And the businesses we surveyed disproportionately say that they reduce hiring and hours for new employees rather than existing employees. They may continue to shrink until their payrolls are fully turned over.
Does the ACA at least spur small business to offer coverage? About a third of those now offering coverage began doing so after the ACA was passed. But two-thirds of those now not offering coverage previously did offer it. Some of the managers said the exchanges are a new option and that offering coverage at work would render employees and their families ineligible for taxpayer assistance.
No doubt a few of the 250,000 lost jobs are replaced at businesses that weren’t seeking to duck the 50-employee threshold. But even reallocated jobs are a problem, because the reallocation is motivated by uneven federal incentives unrelated to creating value in the marketplace.
The ACA is an important reason why the growth rates of employment, wages, productivity and GDP continue to be substandard. Maybe it is time for repeal.
Democrats loudly complain that people will lose health insurance if the Affordable Care Act is repealed. They never mention those who lose jobs because the ACA remains.
The ACA includes a penalty on employers that fail to provide “adequate” insurance for full-time workers. Thanks to the ACA, hiring the 50th full-time employee effectively costs another $70,000 a year on top of the normal salary and benefits.
Many business owners have described how this penalty prevents them from hiring and has caused them to reduce work hours to below the full-time threshold. ACA supporters dismiss these statements as “mere anecdotes” not corroborated by national sampling and statistical analysis. But did any of them rush out to gather the national samples, especially after Jan. 1, 2016, when the employer penalty took full effect?
In partnership with the Mercatus Center at George Mason University, in March 2017 I was able to commission Hanover Research to survey small businesses nationwide regarding their hiring and compensation practices. The result was a sample of 745 small businesses, representing every major industry and together employing almost 50,000 people.
We asked managers (almost evenly divided between Democrats and Republicans) how many people each business employed and whether it offers health insurance. Many businesses, when they do not offer coverage, keep their payrolls just below 50 full-time employees and thereby narrowly escape the ACA’s penalty. This pattern is not visible among businesses that offer coverage.
When we followed up, the businesses employing just fewer than 50 often said the ACA caused them to hire less and cut hours below the full-time threshold. The penalty caused payrolls to shrink or prevented them from growing.
Nationwide, we estimate the ACA-inspired practice of keeping payrolls below 50 has cost roughly 250,000 jobs. This does not count jobs lost when businesses close (we didn’t survey closed businesses) or shrink because of other ACA incentives.
The tally of lost jobs is bound to grow because the penalty itself automatically grows and the IRS is still learning how to enforce it. And the businesses we surveyed disproportionately say that they reduce hiring and hours for new employees rather than existing employees. They may continue to shrink until their payrolls are fully turned over.
Does the ACA at least spur small business to offer coverage? About a third of those now offering coverage began doing so after the ACA was passed. But two-thirds of those now not offering coverage previously did offer it. Some of the managers said the exchanges are a new option and that offering coverage at work would render employees and their families ineligible for taxpayer assistance.
No doubt a few of the 250,000 lost jobs are replaced at businesses that weren’t seeking to duck the 50-employee threshold. But even reallocated jobs are a problem, because the reallocation is motivated by uneven federal incentives unrelated to creating value in the marketplace.
The ACA is an important reason why the growth rates of employment, wages, productivity and GDP continue to be substandard. Maybe it is time for repeal.
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