More (Bad) Jobs: The Unexpected Consequences of the ACA

During Congressional debates over the Affordable Care Act (ACA), Republicans and business leaders warned that it would result in the loss of jobs. In fact, their first attempt at repealing the ACA was called “Repealing the Job-Killing Health Care Law Act.” But as it turns out, the ACA may have just the opposite effect: creating more jobs by splitting the work of the already underemployed. As a result, the growth of underemployment could be an unexpected consequence of the ACA.

The most notable example is Wal-Mart, the world’s largest private employer. After being a cheerleader for the law, Wal-Mart announced in December 2012 that it would join other employers in evading both the spirit and letter of the law. In the last year, it had already announced that part-time workers hired within the last 12 months would be subjected to an “Annual Benefits Eligibility Check” each August. Now, Forbes Magazine reports that “Employees hired after Feb. 1, 2012, who fail to average the magic 30-hours per week requiring a company to provide a healthcare benefit, will lose their healthcare benefits on the following January. Part-time workers hired after Jan. 15, 2011, but before Feb. 1, 2012, will be able to hang onto their Wal-Mart health care benefit if they work at least 24 hours a week.” Wal-Mart has insisted that it can’t afford to pay benefits, and it will avoid the ACA’s requirements by scheduling current workers for fewer hours and hiring more part-timers.

But the expansion of underemployment resulting from the ACA is not confined to the service and retail sectors. For example, my former employer, Youngstown State University (YSU), announced in November 2012 that it would limit the hours of all non-union part-time employees, including the part-time faculty who teach about 60% of YSU’s courses. Department chairs were instructed to cut part-timers to less than 24 hours per week. To make matters worse, all part-timers must now sign a form that states they acknowledge that the employer has informed them that they are not classified as public employees so the University will not pay into a state pension for them. Of course, part-time faculty and staff are among the lowest-paid workers at YSU, and any hope they had of supporting themselves by taking on more teaching is now gone. The shift to increased reliance on part-time and adjunct faculty is old news in higher education, but actions like those taken at YSU and elsewhere are making the problem even worse.  Like part-time retail workers who scrape by through multiple jobs at different stores, part-time faculty must take on multiple teaching assignments, becoming academic nomads, always moving from one teaching assignment to another.

Some may not even have that option. A new policy in Virginia will expand academic underemployment even further by claiming that the State is the employer, not separate campuses. This means that adjunct faculty can’t cobble together courses at various state schools without breaking the part-time threshold of 29 hours per week. Adjunct faculty will have to find work outside the state system.

Once seen as paragons of moral and ethical behavior, universities have embraced the market values of the retail and service industries. No doubt, the ACA provides additional incentive to expand underemployment in the academic community, contributing to the Wal-Martization of America’s public universities.  The effect might well move in the other direction, too.  As one of my former students suggested, it’s easy to imagine commercial companies justifying their limited-hours policies by pointing out that universities are doing it.

Cutting hours and creating more precarious jobs is only one of the tools employers are using to cover the expected costs of the ACA. Some companies are allowing workers more hours but requiring them to pay higher premiums and co-pays. We’re likely to see more of this kind of cost shifting, particularly in the low-wage service and retail industries where employers are not willing to reduce hours and avoid paying penalties under ACA.  Some employers might also reduce wages to cover increased costs and avoid penalties for not providing insurance. That is, until the minimum wage is reached, which could be another incentive to cut hours.

Other companies will simply stop providing health care coverage. The Wall Street Journal recently reported that the Congressional Budget Office has raised its prediction of how many people will lose employer-provided insurance from four million to seven million. The Congressional Budget Office has suggested that the ACA will cost the public more than originally expected, because more workers will be covered by the new health-care exchanges. The result will be large increases in government subsidies.

Employers’ efforts to avoid paying for health care contribute to another kind of cost shifting: from private business to taxpayers.  When companies increase the number of part-time, low-wage workers and refuse to provide health care benefits, states end out subsidizing businesses through the social safety net. For example, in 2010, the citizens of Ohio paid $64 million dollars in welfare payments to Wal-Mart employees. This will likely increase starting next year, because the ACA expands eligibility for Medicaid to anyone with income under 133% of the federal poverty level. Most Wal-Mart workers will fall under that income level.

It seems clear that many employers, especially in low-wage sectors, will do everything they can to limit workers’ hours or shift costs to workers or the public in order to avoid the requirements of the ACA. And I bet they’ll brag about how many new jobs they’ve created and how they’re contributing to economic recovery, without acknowledging the low wages and limited hours of those jobs. They’ll shift the burden to the growing working class, many of them part-time workers, who will have more insecurity, lower wages, and increased out-of-pocket health care costs.

Given the regulatory evasions, a single-payer system, like Medicare for all, would be better for both workers and taxpayers. After all, conservative business and political leaders said the ACA was first step toward universal coverage. Their evasions of the bill could make their predication come true. Let’s hope.

John Russo

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4 Responses to More (Bad) Jobs: The Unexpected Consequences of the ACA

  1. Jack Labusch says:

    Single payer? Well, duh, yeah. But how do you persuade those now insured to swap the bat-poop crazy “wages-plus” formula for paying for group health insurance enrollment for the “wages-minus” formula of paying for universal health care under a progressive taxation scheme? There’s a good case to be made that the groups of group health insurance are pathological critters, but almost no one has bothered to show that.


  2. Steven Capps says:

    This is a very enlightening post. I had never thought of these side-effects of the ACA before, but they seem so obvious that it is slightly surprising that I have not heard of this argument against the ACA before.


  3. Rick Rowlands says:

    What unexpected consequences would single payer bring John? Should it too be another bill that nobody understands or even cares to read before voting for it? Many of us tried to warn people of the dangers of enacting legislation without a full and thorough understanding of the consequences, but it fell upon deaf ears. The blame for this situation must be placed squarely on the shoulders of congress and the president.

    Employers are doing what they must to to remain competitive, and if that means cutting hours then that is what they must do. There is no guaranteed operating budget in a business like there is in academia and government, and no captive audience of customers either. When government changes the rules and forces increased costs upon business, nobody should be so naive to think that those costs will be happily absorbed with no blowback.

    The ACA is having the same effect that all the other recent large cumbersome pieces of legislation have had. It creates new problems where none had existed before, harms small enterprise and individuals while large entities benefit, cost way more than estimated and still does not solve the problem that the law was intended to address.


  4. nedhamson says:

    Not unexpected by many – or at least by me. Employers have been using the less than 24 hours a week to evade paying overtime and workman’s compensation for years. That is why most big outfits like WalMart and Mickey D have a ton of part-timers and regularly work folks less the permanent part-time. It is the reason so many service workers have two or three jobs! Sucks – single payer would have been better but would not pass.


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