Wednesday, December 18, 2013

Obamacare and Part-Time Work----letter to the Wall Street Journal

To the editor:

Andrew Puzder argues correctly that Obamacare encourages employers to add more part-time and fewer full-time workers.  But he pushes his argument too far. 

When the mandate finally kicks in,  employers who must start providing insurance for their higher-paid workers can reduce cash wages by the amount of their premiums and thus incur no increase in their total cost of labor, as those who already supply insurance are doing now.    

Employers with low-paid workers cannot reduce wages below the legal minimum and will therefore reduce them to part-time.  These are the businesses for which Puzder’s analysis is correct.

Employers with higher-paid workers would not save money by making them all part-time.  Such a strategy would ignore the value placed by workers on insurance. To be equally attractive to newly part-time workers,  such employers would have to increase wages by more than their decreased insurance costs since individually purchased insurance costs more and would not be tax-sheltered.  And their management expenses would increase because of the need to supervise more workers.    

Mr. Puzder is chief executive of a restaurant chain, and restaurants do employ large numbers of  low-wage workers,  but his analysis cannot be extended to  the economy in general.

Paul deLespinasse


A version of this letter was published by the Wall Street Journal

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