Friday, September 20, 2013

Is Obamacare Really Turning Our 'Full Time Economy into a Part Time Economy'?

It must really be nice not to have to support anything you say as a member of Congress.  I sure wish I had that kind of immunity when I speak or write something.  Take, for example, Eric Cantor's (R-VA) statement about the effect of Obamacare on the U.S. economy.  In justifying his vote for the continuing resolution to keep federal spending at current levels while defunding Obamacare he said,
“Each week, we hear stories about how both major employers and small businesses are cutting back benefits and cutting back hours. The president’s health care law is turning our full time economy into a part time economy.”
 As a political scientist a good part of my job involves being skeptical about truth claims made by politicians, especially when they involve cause and effect.  So let's dissect Cantor's truth claim in the above statement. 

First, Cantor levels a generic claim about how 'major employers and small businesses' are 'cutting back benefits and cutting back hours.'  Notice that he does not provide any source for this claim other than '...we hear stories.'  Are these 'stories' representative of all major employers and small businesses?  We have no way of knowing because Representative Cantor does not give us any idea where these 'stories' are coming from.  That means we'll have to do some searching on our own.  According to Fox Business News, which cites two surveys but doesn't provide links to the data, approximately 20% of the 603 small business owners surveyed by the Society for Human Resource Management have reduced workers hours because of the employer mandate requiring health insurance coverage by employers with 50 or more employees.  If my math is correct, that means 80% of the small businesses surveyed have not reduced workers hours.  Yet, we still do not have any idea if these 603 businesses are part of a random, representative sample or a convenience sample.  Unfortunately, one has to pay a membership fee to get access to the data and methodology utilized in this survey.  All we can tell from the results released is that a small percentage of small businesses have decided it is economically advantageous to reduce the number of hours part timers work to less than 30.  The problem with the first part of Cantor's statement is that he doesn't make it clear that this is happening among a small number of employers.  Further, as the Fox article indicates, some employers are actually increasing the number of hours full time (over 32 hours per week) are working to compensate for reduced hours by part timers.  Thus, the net economic effect is unclear.

The second part of Cantor's statement is more problematic as he makes the claim that Obamacare ' turning our full time economy into a part time economy.'  Neither of the two surveys the Fox News story referenced indicated that any such thing is happening.  There is also no data to support the connection between increasing hiring of part time workers and the health care law.  Note that the surveys found that employers were reducing the hours of part time employees, not full time employees.  What Cantor is probably talking about is the fact that part time employment has been growing at a faster pace than full time employment in the U.S. economy.  But that trend began long before the Affordable Health Care Act ever saw the light of day.  The chart below shows the growth of part time jobs versus full time jobs since the start of the Great Recession in late 2007.  The full source of the data is here.

Once again, Cantor makes the fatal error of equating correlation with causation, as politicians and amateur statisticians are frequently apt to do.  That's not to say Cantor is's just that there isn't enough evidence to support the contention he makes.  Further, according to the Bureau of Labor Statistics, there are approximately 144 million jobs in America today.  Roughly 81% of those are full time jobs.  It is unknown what percentage of people working full time jobs also have second part time jobs.  Even so, with 81% of American jobs being full time jobs with an average hourly wage of $23.98 it seems safe to say that we are in no current danger of entering into a 'part time economy.'  In fact, as more and more baby boomers retire from their full time jobs, they may welcome the creation of more part time opportunities. 

Yet another reason for the growth in part time employment is where the job growth is occurring.  Most job growth since 2009 has been in the hospitality and retail industries, which typically pay lower wages and provide fewer benefits than industries such as healthcare and manufacturing.  But this is part of a much longer term trend that began in the 1980's as American manufacturers found it easier and cheaper to outsource production.  As the country has moved from an economy that makes things to one that provides services employers have found more need for part time workers to give them the flexibility to adjust to lulls in the business cycle.  For example, in the restaurant industry, which has exploded in size over the past 30 years, it is not always necessary to have a full crew so there are many more part time jobs in food service.  That makes good economic sense.  The same is true in retail services.  It would be more troubling if industries that traditionally employed full time personnel were shifting to part time personnel to avoid providing health insurance.  Fortunately for the country (and unfortunately for Mr. Cantor), there is no evidence that such a shift has been or will occur because of the Affordable Care Act.  The truth is that most Americans who work full time already have health benefits provided by their employers and that is very likely to remain the case as the ACA enters full implementation in 2015. 

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