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Obamacare creates perverse incentives for employers to cut hours

Published: November 10, 2012
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Welcome to Part Time Nation (Brought to you by the new healthcare law)


If you are a full time non-salaried employee in a company with 49 or more other full time employees your employer my be inclined to cut your working time in an effort to avoid the cost of Obamacare penalties. Many companies plan on doing just that, especially in retail and food service.

In the very near future, full-time blue collar jobs will be even harder to come by.

For many workers in relatively good health (the young) who earn over $15,000/year and are not full time (as many more workers a likely to be in the near future) it’s not such a good deal at all. They will have to buy insurance in exchanges or face a fine.

This seems an odd turn for a group of people who have been hit most in the recession.

The question we have is why this perverse incentive which encourages employers to cut hours for employees was allowed to become law in the first place? In the rush to force through Obamacare life may have been made much more difficult for those many proponents of the Affordable Care Act said they wanted to help.


Why would companies consider shifting to part-time workers? Under the health care law, if an company has more than 50 “full time equivalent” workers, a combination of full and part-time employees, but doesn’t offer “affordable” coverage that meets the government’s minimum value standard, the company will have to pay a penalty. This penalty is determined by the number of full-time employees minus 30 full-time employees. So to reiterate a very important point: part-time workers are not part of the penalty formula. The health care law creates a perverse incentive to hire part-time versus full-time workers.

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