Skip to comments.What Obama Is Doing to the Job Market
Posted on 03/09/2013 5:35:11 AM PST by Kaslin
Firms are awash with cash, but they're not hiring. What's going on? One place to look for an explanation is the policies of the Obama administration.
President Obama's proposal to increase the minimum wage and the health insurance employer mandate are combining to destroy job opportunities for young, unskilled workers in cities and towns across the country.
The minimum wage, currently set at $7.25 an hour, will jump to $9 an hour and be indexed going forward if the president gets his way. The Affordable Care Act (ObamaCare) is already the law of the land and its effects are being felt right now, even though the employer mandate doesn't go into effect until next January.
With respect to the new health law, the Congressional Budget Office estimates the cost of the minimum benefit package that everyone will be required to have will be $4,750 for individuals and $12,250 for families. That translates into a minimum health benefit of $2.28 an hour for full time single workers and about $3 an hour for someone working 30 hours a week. For family coverage, the cost is $5.89 an hour for a 40-hour-a week employee and $7.85 an hour for a 30-hour-a-week employee.
These are not small changes. They can double the cost of labor in some cases.
The law does not specify how much of the premium must be paid by the employer versus the employee. But there is a government requirement that the employee's share cannot exceed 9.5% of wages for low- and moderate-income workers and an industry rule of thumb that employers must pick up at least 50% of the tab. The economic effects are the same, however, regardless of who writes the checks.
Employers have four ways to reduce this burden: (1) the mandate doesn't apply to firms with fewer than 50 workers, (2) the mandate doesn't apply to employees who work fewer than 30 hours, (3) the employer doesn't have to offer or subsidize family coverage and (4) rather than provide health insurance, the employer can pay a $2,000 per (full-time) worker fine.
There are going to be lots of firms that fail to grow beyond 49 employees. But be warned: If an individual owns, say, two or three fast food franchises, the IRS has signaled that it will treat their combined operations as a single business. Also, in calculating the number of full time workers, the IRS is going to count "full-time equivalents." That means that two workers, each working 15 hours a week, will count as the equivalent of one full-time (30 hour) worker.
As noted, employers are already reacting to ObamaCare. In fact, there was a huge shift to part-time employment in the fast food industry beginning in January. The reason: ObamaCare will employ a 12 month "look back." In deciding whether a worker is full-time or part-time next January (when the mandate becomes effective) the government will look at the average weekly hours worked in the previous year.
I believe this change is economy wide. As Catherine Rampel noted at The New York Times economics blog the other day: Compared with December 2007, when the recession officially began, there are 5.8 million fewer Americans working full time. In that same period, there has been an increase of 2.8 million working part time.
One fast food restaurant owner I talked with (owning 100 franchises) told me that the average work week for their employees has been reduced to 25 hours this year compared to 38 hours last year.
Employees may be able to work part-time at two different restaurants both of which avoid the mandate by switching to part-time labor. On the other hand, they may just choose to work fewer hours. The reason: When the effects of the tax law are added to the effects of ObamaCare, a moderate income family will face a 41 percent marginal tax rate.
As a Wall Street Journal editorial calculated the other day, letting part-time workers work more hours can be expensive. If a 29 hour-a-week employee works one more hour for 50 weeks that will trigger a $2,000 fine. Dividing the fine by the additional hours of work, that works out to a $40 an hour penalty.
Bottom line: employment opportunities are being curtailed by the imposition of ObamaCare. Things will be even worse if a 24 percent increase in the cash minimum wage is heaped on top of it.
Economists have traditionally believed that an increase in the minimum wage (as well as mandated benefits) causes unemployment. However, a study by David Card and Alan Krueger found very little employment effect in the fast food industry in Pennsylvania and New Jersey.
You wonder if economists ever talk to employers when they do these studies, however. Because of labor law and tax law, employment in the fast food industry has already been pared to the bone. When I was young, every restaurant had waiters and waitresses who brought food to your table. But this service has been priced out of the market in fast food by past increases in the minimum wage. Fast food restaurants are getting by with the absolute minimum amount of labor they need to supply their products.
If government imposes higher labor costs on this industry, the restaurants will try to make it up by raising their prices. However, if the customers won't pay the higher price as may be the case in poorer neighborhoods the restaurant will have to close.
Moreover, in order for prices to rise in one market there must be a corresponding decline in other markets. For the economy as a whole, employers can't raise prices on the average with no change in the money supply.
Excellent read, in a sickening kind of way.
MetLife is pulling up stakes in CA and along the North East and moving to North Carolina. I think that is pretty interesting. It represents 2,600 jobs.
Put all the bad Democrat policies on steroids, and that is what we are seeing. They are so full of themselves on their policies that they don’t see the facts, or they are simply trying to destroy capitalism and the Republic...kinda like the Nazi’s did in the 1930’s.
I think Obamacare is increasing part time employment. Employers are hiring three people to do two jobs. That way none of them works more than 30 hours and the boss doesn’t have to pay for healthcare.
The plan is to siphon off that cash by making employees more expensive. But guess what, business owners are business owners because they work like dogs. And don’t have to rely on lazy greedy workers, they will do the work themselves.
Entry level employment has been steadily falling since the minimum wage. I remember the before and it was much different than today.
This explains self service gas stations, the ATMs obama blamed our employment problems, as well as moving our various other service centers overseas to India and other places when we used to just take care of it ourselves.
The progs pushed this on purpose and ignored economists and history's record to do it. Do you really need to ask why?
Here's the playbook:
Make things bad, blame someone else and promise to fix it.
Keep people stupid and they will believe you and keep you in office for as long as they think you're taking care of them.
They've always been the party of slavery and they've gotten better at it.
In the old days, they rounded you up and sold you against your will and we called it what it is: slavery.
Today, we volunteer with our vote for it and call it "democrazy".
More Are Quitting the Workforce Than Getting Jobs
Posted 03/08/2013 06:00 PM ET
Jobs: Who can complain about nearly a quarter-million jobs created in February? Until, that is, you learn that more people left the labor force than got new jobs, continuing a long-term trend under President Obama.
Read More At Investor’s Business Daily: http://news.investors.com/ibd-editorials/030813-647381-job-growth-outpaced-by-growth-in-nonworkers.htm#ixzz2N3gCqHcr
I wish one reporter would ask a republican office holder why he or she is going along with this. Remember, they ran in 2010 saying they would defund obamacare. At the very least they could start publicly advising companies to simply ignore the law and see what the “government” tries to do about it.
It’s apparent to me, that for some reason, the politicians from both parties are intentionally destroying this country.
There’s another economic revolution brewing here that has not been fully appreciated....
The productivity revolution.
Middle managers are being displaced by better computer software and new communication platforms.
Teachers and trainers at every level will be challenged by Internet schools.
And, blue collar productivity increases every year thanks to better workplace design, better scheduling, labor saving machines, and robotics.
Younger workers with limited or very generalized skills will face a frightening employment market in coming decades.