How Obamacare Increases Unemployment

Suppose that a firm with 49 employees does not provide health benefits. Hiring one more worker will trigger a penalty of $2,000 per worker multiplied by the entire workforce, after subtracting the statutory exemption for the first 30 workers. In this case the tax would be $40,000, or $2,000 times 20 (50 minus 30). Indeed, a firm in this situation might have a strong incentive not to hire a 50th worker, or to pay him off the books, thereby violating the law.

In addition, if an employer offers insurance, but an employee qualifies for subsidies under the new health care exchanges because the insurance premium exceeds 9.5 percent of his income, his employer pays a penalty of $3,000 per worker. This combination of penalties gives a business a powerful incentive to downsize, replace full-time employees with part-timers, and contract out work to other firms or individuals.

The new law will make it harder for small businesses with 50 or more employees to compete with those with fewer than 50 employees.

When the employer mandates are phased in 2014, many businesses will be motivated to reduce the number of locations and move workers from full-time to part-time status. This will reduce employment still further and curtail the country’s economic growth.

Industries that have traditionally offered the greatest opportunities to entry-level workers—leisure and hospitality, restaurants—will be particularly hard-hit by the new law. Many of these employers do not now offer health insurance to all of their employees, and employ large percentages of entry-level workers, whose cost of hiring will increase significantly.

Under the new law, for each block of 30 weekly hours of part-time work by one or more employees a business is deemed to have one full-time equivalent employee. The penalty for full-time employees is $2,000 per worker after the first 30 employees.

Businesses with fewer than 50 employees will be the big winners. If they do not hire too many workers—another government-induced disincentive for hiring in this weak labor market—and stay within the 49-person limit, these firms will not have to provide health insurance and will have a cost advantage over the others. Such businesses will be able to compete advantageously against businesses with multiple locations and 50 or more employees.


[link to www.manhattan-institute.org]


It's more than I usually post, but it's under 50% of the Article.

It explains a lot. I've read over and over that companies are not hiring due to Obamacare and this explains why.

Last Edited by FatalW1shes on 06/28/2012 09:30 PM