I walked into my local CVS drugstore at 5550 Connecticut Avenue in Washington last week to pick up some photos. Not a cashier in sight. The row of cash registers had suddenly vanished, replaced by self-scanning checkout machines. Come 2014, the health care law will make it more costly for employers to hire low-skill workers. And, as workplaces around the country prepare to implement the new law, employers are considering how best to comply.
For some companies, such as CVS, that means that low-wage and part-time jobs will start to go, not in 2014, but now.
It’s not as though CVS could not find cashiers. A cashier is a low-skill job, and low-skilled workers have some of the highest unemployment rates in America.
Adults without high school diplomas face an unemployment rate of 15.7 percent, more than three times as high as rates for college graduates, and well above the national average of 9.8 percent. The unemployment rate for teens, another low-skill group often seen behind cash registers, is 25 percent.
Industries that have offered the most opportunities to low-skill workers, such as retailers and the leisure and hospitality sector, will be particularly hard-hit. Many employers don’t provide their employees with health insurance.
Under the new law, every employer with more than 50 workers will either have to offer health insurance or pay an annual penalty. The penalty for full-time employees will be $2,000 per worker.
Moving from 50 to 52 workers will cost a firm $44,000 per year (no penalty is levied for the first 30 workers).
It’s clear that every firm with fewer than 50 workers is trying not to grow larger than the magic number. And every firm with 55 or 60 workers is trying to lay off workers, or contract out operations, so as to reach 50 and not have to pay the penalty.
That’s no way to increase employment, especially since small business is supposed to be the engine of job growth in the economy.
The $2,000 fine will amount to 9 percent of wages in the retail trade and 15 percent of average wages in the food and beverage industry. This is in addition to the employer’s share of Social Security and Medicare taxes (7.65 percent, equal to what the employee pays), as well as workers’ compensation and unemployment insurance.
With higher-skill jobs, employers can offer the required benefits and pay for them by cutting the wage. But low-wage jobs in the restaurant and retail sectors leave little room for cuts in wages.
Hence, firms have an incentive to become more automated, or machinery-intensive — and hire fewer workers, just as my local CVS has eliminated cash registers. Restaurants and drugstores that are open 24 hours a day will be disadvantaged, because they need several shifts of workers to stay open.
The irony is that in the name of expanding health care coverage, Congress and the White House are making it harder than ever for unskilled workers to get started in the work force.
No employer, whether CVS or Citibank, should be required to offer health insurance to workers, just as they are not required to offer auto and home insurance. But the employers of low-skill workers in the restaurant and retail sectors will see the most distortions because of the new mandate.
With more than 15 million Americans out of work, 42 percent for six months or longer, the first task of the 112th Congress should be getting people back to work.
That means repealing or reforming the health care law so employers aren’t penalized if they don’t offer health insurance. Otherwise, more unskilled Americans will be condemned to the ranks of the unemployed, and the rest of us will be condemned to use self-scanning checkout machines at CVS.
Examiner Columnist Diana Furchtgott-Roth, former chief economist at the U.S. Department of Labor, is a senior fellow at the Hudson Institute.
