On The Rise: A U.S.-Style Work-Sharing?

Investor's Business Daily

ObamaCare was sold as a way to achieve several goals: affordable care, guaranteed coverage, protections against bankruptcy.

But before such promises have a chance of being realized, the health reform appears to be delivering something else: Germany-style work-sharing.

Germany's program gives employers incentives to cut hours instead of payrolls, as government supplements pay of workers facing shorter shifts.

Back home, employers are cutting hours to avoid ObamaCare fines for failing to provide full-time workers with broad, affordable coverage. There's evidence that firms are adding workers and reducing hours.

Economists hailed Germany's work-sharing for reducing unemployment during the recession. ObamaCare may be having a similar effect. But there are differences that make the health reform's labor side-effects much more questionable.

Over the past year, retailers have cut average weekly hours for nonsupervisory workers by 2%, the sharpest such decline in more than three decades. Meanwhile, rank-and-file employment is up 132,000, or 1%, over the same period.

Also, total benefits for service-occupation workers fell in Q1, the first-ever decline, in a sign that employers are preparing to shift some costs of health care coverage to the government.

Some 2.3 million workers might have their hours cut due to ObamaCare's employer mandates, even if there's no negative impact on total hours worked, a recent study from the University of California at Berkeley Labor Center estimated.

The other part of the equation involves more government benefits for those facing shorter hours. This will come starting in 2014 from ObamaCare health subsidies. Households working less may also get additional benefits, such as food stamps.

While Germany's work-sharing is seen as an antidote to recession, ObamaCare is long-term.

ObamaCare's incentives to limit employee workweeks will remain in effect at all points of the economic cycle.

Another big difference relates to whom the work-sharing will impact. In Germany, work-sharing helps firms cut costs because the unionized share of the labor force is much higher and it is hard to dismiss workers.

The program is tailored to deal with short-term declines in factory orders, for example.

But ObamaCare's employer mandate will primarily affect the hours of the modest-wage service-industry employees who will be eligible for the program's subsidies.

It seems likely that this long-term tilt toward part-time jobs for modest-skilled workers will lead to two unwelcome results.

More workers will have extra difficulty climbing above the bottom rung of the corporate ladder.

Also, more people will work multiple jobs, at a likely cost to individual productivity and quality of life.

Still, there is much uncertainty as to how far-reaching the shift to more part-time work and government benefits will be. The 2.3 million workers seen as likely candidates for shorter shifts in the University of California study only represent about 1.8% of workers.

But there are reasons to think the impact will be greater. For one, the study doesn't count firms with fewer than 100 workers or new hires limited to part time due to ObamaCare incentives.

The Berkeley study authors see their estimate as being supported by Hawaii's experience. The state saw a 1.4 percentage point rise in the share of workers clocking sub-20 hours a week after it required health insurance for those working 20-plus hours.

Beyond the difficulty of running a firm with under-20-hour workers, there's reason to believe that ObamaCare's impact on hours may be far bigger than in Hawaii.

Consider the up-to-$3,000 penalty firms will face per worker who gets ObamaCare subsidies. The nondeductible penalty equates to more than $4,000 in wages for profit-making firms.

For workers making $12 an hour for 29 hours, an employer would have to pay an extra 60% — $17 an hour — for the next 11 hours of work, once potential ObamaCare fines are factored in.

By comparison, an employer would have to pay an extra 30% per hour — $15.70 — for the extra 21 hours of work beyond the 19-hour Hawaii threshold.

A wild card is that employees may choose not to pay for ObamaCare, even with the subsidies, in which case no penalty would be imposed on employers.

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