The best kind of problem is one you can solve before it’s too big to handle, and it’s not often Congress is afforded the ability to do just that. In this case, according to a recent Congressional Budget Office report, the Affordable Care Act will result in 2.5 million fewer full-time jobs by 2024. Fortunately, the CBO’s report also alludes to a possible change that would mitigate this problem — employer mandate relief by returning to the traditional definition of 40 hours a week for full-time work in the Affordable Care Act.
In their recent report, the CBO outlined three main ways the Affordable Care Act will reduce full-time workers — by decoupling health insurance from employment, increasing marginal effective tax rates on workers and raising costs on businesses through the employer mandate.
Decoupling health insurance from employment might be considered a positive by some. What’s more, higher effective marginal tax rates, while bad for the U.S. economy, are an inherent trade-off with any means-tested program. It’s a core feature of the Affordable Care Act. However, the CBO also argued that by raising costs on businesses, the employer mandate will lead to fewer full-time jobs offered in the short run. In the long run, businesses will pass on the cost to workers through lower wages and potentially less hours, causing fewer people to seek full-time work.
Fortunately, there is bipartisan momentum around legislation that would return to the traditional definition of 40 hours a week for a full-time worker. Currently, the definition of full time under the Affordable Care Act’s employer mandate is 30 hours a week, forcing employers to provide coverage to more workers at higher costs, or face a penalty.
The House is expected to consider Rep. Todd Young’s, R-Ind., bipartisan bill, HR 2575, the Save American Workers Act, this month. Meanwhile, in the Senate, Senators Susan Collins, R-Maine, and Joe Donnelly, D-Ind., gained five additional co-sponsors in the past four months of 2013 for their bill, S 1188, the Forty Hours Is Full Time Act, including Democratic Sen. Joe Manchin III, D-W.Va. These bills will reduce costs on businesses, which will ensure employers can reward hard work with more hours and higher wages, encouraging people to remain in the workforce.
Opponents of these proposals make three dubious claims. First, they claim there is only anecdotal evidence — not “real” evidence — that employers are reducing hours. However, a recent study by Public Opinion Strategies (commissioned by the International Franchise Association and the U.S. Chamber of Commerce) reveals that 27 percent of franchise decision-makers report that their company has replaced full-time employees with part-time workers, even with the employer mandate a year away. Business owners are not fear-mongering on this issue — they are articulating a real concern.
Terri Henderson, 6, center, whose mother is El Salvador, attends a rally with members of Congress at Union Station's Columbus Circle to announce the Restore Opportunity, Strengthen, and Improve the Economy (ROSIE) Act on July 29, 2014. The legislation provides incentives for government contractors to pay a living wage and other benefits that would help low-income workers.