The ObamaCare Economy: More Jobs, Fewer Hours, Less Pay

John Mariotti is an experienced author and former senior executive. His columns will appear weekly on The Brenner Brief on Wednesdays.

With the implementation of the Affordable Care Act (Obamacare), one of its most lasting and far-reaching (and unintended) consequences is already emerging. Employers who have numerous, relatively low-pay employees are changing their practices to employ these workers only 30 hours per week. This keeps them below the threshold for full-time employment, and relieves employers of the economic burden of paying for health insurance — or paying a penalty for not doing so.

This seemingly innocuous change is already sweeping through the restaurant and hospitality industry, but this will just be the first of many service industries that will adopt this new policy. What this means to the American workforce is that many more people will find jobs, but they will all earn less than before, by twenty-five percent (compared with pay for working a 40-hour week).

The 40 hour workweek was created during the Industrial Revolution in Britain two centuries ago. Industrial production and large factories had already changed working life and conditions. The working conditions were poor, the work hard, and both the health and morale of the workers suffered from brutally long hours (10-16 hours per day, often 6 days per week). Child labor was also common.

Starting in 1810 and building by 1817, the concept of three-day parts evolved — eight hours for work, eight hours for recreation and eight hours for rest. This was considered an ideal day, but the concept was not quickly adopted. Employers were slow to move from 12 to 10 hour days, and it was not until almost 50 years later (1860s) that the eight-hour day and 40 hour week started to grow more widespread.

This practice migrated across the ocean to America with many other British and European practices, but didn’t become fully entrenched until the American industrial movement followed the British one — from brutally hard, long days and weeks to shorter, more humane ones. Forty-hour weeks became the standard, especially when unions became much more involved. This 40-hour benchmark also became the determinant for when workers would be paid “overtime” pay.

Now, as just the first of many unintended consequences of Obamacare, the 40 hour week will begin to fall prey to the new, 30 hour (non-full-time) workweek. Employees will earn 25 percent less in their weekly paycheck, further worsening the plight of the middle class. While 25 percent more workers will be needed and additional jobs may result, everyone will be proportionally worse off. A second job will be needed to simply “make ends meet” for workers who were accustomed to living from 40 hours pay.

Ultimately, it will be no surprise if the government’s heavy hand doesn’t intervene further and pass a law (or more likely, a proclamation of some agency in the Obama Administration) that makes the use of a shorter workweek, “for the express purpose of avoiding Obamacare regulations,” illegal. Once government begins to dictate more and more of the terms of everyday Americans lives, there is nowhere to draw the line.

Remember this prediction: the 30 hour workweek will become a new normal, and will cause the number of jobs to increase (to the glee of the Obama bureaucrats). However, their joy will be short-lived when it proves to worsen the plight of the already struggling middle class. They will not only earn one-quarter less, but also they will not be covered by employer health care plans, further adding to the cost of government provided health care. The middle class will be hard hit, since the areas likely to adopt this new, shorter workweek, are some of the largest employers — today’s service economy.

When bureaucrats who don’t understand how business works in a free enterprise society start meddling, unintended consequences like this emerge, grow and worsen. Welcome to the Obama economy, where everyone is becoming poorer, and they all need more “handouts” — everyone that is, except the growing cadre of government workers, whose unions diligently protect their incomes while they are dictating how middle-class Americans live their lives.

Comments

  1. Hi John. Great post.
    One of the things some of my friends and I believe is going to occur out of the implementation of the Obamacare taxes is a contraction in the service industry either through consolidation or small companies shuttering up. The recordkeeping alone is going to be a nightmare in an industry filled with highly transient employees and smaller, franchised employers. A 60 or 70 employee, two location fast food employer cannot afford the cost of paying the expenses of Obamacare nor can they afford the training and record keeping associated with adding 25-30% more employees – the 25% would be an ideal addition, but not necessarily a practical one. There will be more needed.
    The other problem with the coming Obamacare nightmare is going to be the contraction in the first half of the year as these smaller business owners realize that, in an already struggling economy, the addition of potentially hundreds of thousands of dollars in new taxes is not something they can afford and they close up shop. It is very likely in an industry with 10% margins they will have to raise sales by 50% to bottom line enough money to afford to pay the Obamacare penalties – Prices for McChickens and Junior Bacon Cheeseburgers are going to skyrocket under this Administration. However, under the regime it will be the fault of the business and not the government.
    While I think you are correct in this new business model being very bad for the middle class, I think it will be tragic to the lower end of the upper class, too. These people, currently doing the employing in these smaller businesses are going to be struggling. Hopefully, for them, they can sell out in the coming year without having to take the 2014 rear side impaling Obama wants to give them.

    • You understand it completely. If only millions more Americans did…things might start to change… The sad irony is that the administration who claims to be looking out for these lower and middle income Americans will end up hurting them (and making them even more dependent on big brother for “welfare-like” support.) Such unintended consequences are the curse of problem solving by people who don’t truly understand the problems…

  2. Everything works perfect for the Failure-in-Chief’s agenda:

    a) People work less hours, don’t have health insurance through their employer and need to look themselves for coverage. Private insurance companies? Too expensive. So they end up where? Right! At the government! That’s exactly what the Failure-in-Chief wanted – and he doesn’t even have to force the people. They don’t have another choice

    b) Let’s make it simple (I know, it doesn’t exactly work that way in reality, but it comes close): an employer has work for 4800 manhours. Until now, he has 120 workers and everyone works 40 hours. With Obamacare, he cuts back the hours to 30 per worker and now 160 people have work . That means 40 more jobs, i.e. 40 people less who are looking for a job = lower unemployment rate. The Failure-in-Chief will brag about the lower rate – of course…

    c) The standard of living for EVERYONE will go down to a lower level, which is one of the goals of the Failure-in-Chief. You remember his words? Something in the line of: we cannot drive with our SUV’s, heat our houses and eat our steaks while people in other parts of the world suffer. With bringing America down other countries don’t feel so poor anymore…

    • I can’t claim originality in how I agree with you. A couple of prominent figures said it better anyway: “I predict future happiness for Americans if they can prevent the government from wasting the labors of the people under the pretense of taking care of them.” Thomas Jefferson
      “I contend that for a nation to try to tax itself into prosperity is like a man standing in a bucket and trying to lift himself up by the handle.” — Winston Churchill
      The very people–the coalition of the minorities–who helped elect Barack Obama to be president are the ones who will suffer the most, when his policies come to full fruition and ruin a great nation. The only hope is that those of us who see the truth can find ways to prevail in the future… Watch for future posts on this topic. Thanks.

  3. I have to disagree with one of your points: Your use of the phrase “unintended consequences.” If you have any idea of the goals the Obama Administration would like to accomplish, it is simply the transformation of America from its historical capitalist society to a “progressive,” socialist platform that gives all the power to the central authority. In short, the consequences of shortening the work week adds greater control to the central authority, making this consequence entirely INTENDED.

  4. All I can think of to say is: Who is John Galt? (For those who don’t get this, check out ATLAS SHRUGGED by Ayn Rand. If you don’t want to read over 1000 pages, Google the Cliff Notes version–then share it widely!)

Trackbacks

  1. […] Mariotti, contributor to The Brenner Brief, wrote about this very issue in his column this morning: The ObamaCare Economy: More Jobs, Fewer Hours, Less Pay. This certainly is an issue — businesses will find a way to get around irrational government […]

  2. […] there’s the low or no growth and too few jobs scenario.  I wrote recently about the spreading 30-hour week so employers can avoid Obamacare.  This creates more jobs numerically, but no more wages, and […]

  3. […] The ObamaCare Economy: More Jobs, Fewer Hours, Less Pay – John Mariotti […]

  4. […] few weeks ago I wrote about the sub-30-hour week, and how it will change the working life of millions of Americans. As thousands of employers hold […]

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