Obamacare and Part-Time Employment

The Patient Protection and Affordable Care Act (PPACA), P.L. 111-148, was enacted into law in March, 2010. Section 4980H of that law requires that employers with more than 50 full-time employees offer a standard level of health care benefits to their full-time employees or pay a penalty for not doing so.  The penalty amounts to $2,000 per full-time employee. The law does not require that benefits be offered to part-time employees who work less than 30 hours per week on average. The disparity in the health care costs of full-time vs. part-time employees brought about by PPACA has raised the question of whether employers would begin hiring a higher percentage of part-time employees.

The provisions of Section 4980H were to go into effect in 2014. However, subsequent regulations changed their effective date. For employers with 100 or more employees, the effective date was changed to 2015, and for employers with 50 – 100 full-time employees, the effective date was changed to 2016. This meant that the look back year for purposes of determining initial compliance with Section 4980H would be 2014 for employers with more than 100 full time employees and 2015 for employers with 50-100 full-time employees.

The chart below from the Bureau of Labor Statistics shows the percentage of part-time workers in the U.S. labor force during the period 1990-2014. During that period, there were three recessions. After each of the first two recessions there was an increase in the percentage of part-time workers followed by a gradual decline to pre recessionary levels. However, during the recession of 2008-2009, there was a large increase in part-time employment during the recession with only a moderate decline in the five years since the recession.  As of July 2014, part-time employment is still above pre-recessionary levels. The conclusion is that employers are still using a high proportion of part-time employees because of their lower total cost. Since health care benefits are a significant component of total employee cost, the PPACA employer mandate is one of the main, if not precisely quantifiable, factors in the current high part-time employment rate. The full effect of the PPACA employer mandate on part –time employment may not become fully known until 2015 when the look back period begins for employers with 50-100 full-time employees.

Having a significant percentage of part-time workers in the workforce can be a negative for the economy. Part-time workers will typically earn less than full time workers and will therefore spend less on consumer goods and services. Since the U.S. economy is 70% consumer driven, this can lead to GDP growth constraints. The U.S. economy has been growing very slowly since the 2008-2009 recession. The continuing high level of part –time employment, due in part to PPACA, could mean slow growth for many more years.