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.
Second, opponents claim that employers will simply cut hours for those working just over 40 to 39 and, since this is a larger pool of people compared to those working just more than 30 hours, these bills exacerbate the problem. Yet, this critique ignores that among businesses with many low-skilled workers, the difference between a part-time and full-time workforce is less pronounced. People working less-skilled jobs for more than 40 hours a week are currently at risk for significant reductions in hours. A shift to 40 hours puts fewer people at risk for hour reductions. Further, for many businesses, those working more than 40 hours are people they rely on to grow their companies. By reducing their hours, business owners only risk losing key talent.
Lastly, opponents suggest that these proposals merely shift the burden from business owners to taxpayers. Yet, as the CBO argued, it is not business owners, but individual workers, who bear the burden.
Ultimately, the Affordable Care Act is the law of the land, but that does not mean we should not work to improve it.
Sen. Mary L. Landrieu, D-La., recently stated, “Just because the bill was signed into law, doesn’t mean it can’t get tweaked or improved over time.”
Sen. Mark Begich, D-Alaska, also recently said, “I’m going to be the guy, and I’m going to continue to be the guy — as I have been since Day One — continuing to try and fix it.” Senate Majority Whip Richard J. Durbin, D-Ill., also stated, “There are things we can do to make the bill better, and we want to do it.”
We completely agree with Sens. Landrieu, Begich and Durbin, and we are heartened to hear that Senate Majority Leader Harry Reid is listening to members of his caucus: “Senators are talking about ways of fixing Obamacare, and I’m happy to continue my discussions with them,” the Nevada Democrat said in January.
We certainly appreciate Reid’s comments and openness to potentially providing relief to small-business owners, and we believe a return to the traditional definition of a full-time work week at 40 hours is a politically viable way to address the negative impacts of the Affordable Care Act on small-business owners, while leaving the core of the legislation intact.
Steve Caldeira is president and CEO of the International Franchise Association.