The Affordable Care Act will not only decrease the number of full-time employees at the hands of their employers, but a provision in the law also incentivizes more workers to drop down to part-time hours on their own, a new study finds.
In “The Affordable Care Act and the New Economics of Part-Time Work,” Casey B. Mulligan, professor of economics at the University of Chicago, finds that the ACA will likely result in 4 million fewer full-time workers across the country due to what she calls “employment taxes.”
The “most obvious” tax — and the way that has been reported about most — is that large employers are penalized for not offering health insurance to their full-time employees. They are not required to offer benefits to part-time employees, offering a good reason to reduce working hours and rely on part-time and contract employees instead of full-time workers.
In addition to this, Mulligan found, the ACA also encourages workers to reduce their own hours with the “provision that full-time employees and their families cannot receive subsidized health coverage on the ACA’s health insurance exchanges…unless their employer fails to offer affordable coverage.”
They can also earn more money by working less because of the subsidies the law gives out. Families with higher incomes get a lower subsidy.
Mulligan compared a 40-hour-per-week full-timer at $52,000 annually to a 29-hour-per-week part-timer at $37,700. After taxes, expenses, and subsidies, the part-timer walks away with $28,854, compared to $27,021 for the full-timer — a substantial difference.
About 50 percent of Americans will be impacted by these provisions and the study finds that these estimates are way higher than any intended consequences of the law found.
“This analysis, combined with lessons from labor market history, leads to an estimate that the ACA will reduce employment and aggregate hours by slightly more than 3 percent, or about 4 million full-time-equivalent workers,” Mulligan wrote. “This is nearly double the contraction indicated in prior studies, mainly because some previous work underestimated the size of the ACA’s employer penalty and did not consider the full range of tax effects.”
