I recently pointed to reductions in full-time adjunct instructor employment as a consequence of PPACA’s requirement that employers pay for health care for full-time employees. So if it’s happening in the non-profit groves of academe, what would we expect to find in the for-profit world?
The same, at least according to Warren Meyer (of Coyote Blog). Writing at Forbes he predicts the end of full-time work in the American retail sector.
Late last year, within the service world, this change was already occurring – at restaurants, at hotels, and in retail stores, managers were already formulating plans…
Slowly, the story is starting to emerge in the general media. Fox News reported on Monday:
The nation’s largest movie theater chain has cut the hours of thousands of employees, saying in a company memo that ObamaCare requirements are to blame.
Regal Entertainment Group, which operates more than 500 theaters in 38 states, last month rolled back shifts for non-salaried workers to 30 hours per week, putting them under the threshold at which employers are required to provide health insurance. The Nashville-based company said in a letter to managers that the move was a direct result of ObamaCare.
This is not an isolated incident at this one company — it is already happening everywhere in the service business. The tree fell in the forest months ago, but it is only just now being heard.
I run a retail service business (operating campgrounds and public parks) with over 400 employees. We knew from the day that the PPACA (or “Obamacare”) passed we would be too large to be exempt from the law and that it would have enormous, even catastrophic effects on our business. So we have spent a lot of time studying the law and its associated regulations to understand exactly how it will affect us. Which has been difficult, since some of the key regulations that would apply to us (e.g. around seasonal work forces) have not even been written yet, just 8 months now before the law is to take effect.
But one thing has been very clear: The best way to be “safe” and avoid the costs imposed by the law was to have one’s workers be classified as “part-time”, or for this particular law working less than 30 hours per week. The other fact that emerged from some IRS rule-making…was that whether a worker was to be classified as part-time on January 1, 2014 would be based on his or her work patterns in 2013. This is why savvy companies, including ours, were planning hard for work force changes last year. Our goal was to get every worker in the company under 30 hours a week before 2013 even started.
Everywhere I traveled last year, this shift to part-time service work was the main topic of discussion — resort owners, hotel employees, waiters and retail clerks all discussed, and generally lamented, the changes. I met private equity folks who were considering buying a restaurant chain, and much of their analysis concerned potential new approaches to splitting shifts to get all their workers under 30 hours a week. I can’t remember going to a single business conference where this was not a major discussion topic. My company’s management training this year had to shorten or eschew entirely our usual productivity and customer service topics in order to spend about half the time planning part-time shift management.
All this may seem a bit extreme to a service industry outsider, not used to the narrow margins and constant focus on cost control down to the penny. I can assure you that for many service businesses, the Obamacare-imposed costs are astronomical. For our $9 million revenue business, the initial tally of potential Obamacare costs came to just over $1 million a year, or three times our annual income in a good year.
But I think there is another reason driving this shift to part-time service work.
The service industry generally does not operate 8 hours a day, 5 days a week, so its labor needs do not match traditional full-time shifts. Those of us who run service companies already have to piece together multiple employees and shifts to cover our operating hours. In this environment, there is no reason one can’t stitch together employees making 29 hours a week (that don’t have to be given expensive health care policies) nearly as easily as one can stitch together 40 hours a week employees. In fact, it can be easier — a store that needs to cover 10AM to 9PM can cover with two 5.5 hour a day employees. If they work 5 days a week, that is 27.5 hours a week, safely part-time. Three people working such hours with staggered days off can cover the store’s hours for 7 days.
Based on the numbers above, a store might actually prefer to only have sub-30 hour shifts, but may have, until recently, provided full-time 40 hours work because good employees expect it and other employers were offering it. In other words, they had to offer full-time work because competition in the labor market demanded it. But if everyone in the service business stops offering full-time work, the competitive pressure to offer anything but part-time jobs will be gone. The service business may never go back.
… Over 25 million workers are currently undergoing or will soon be facing this stunning change in the way they work….
At Coyote Blog Meyer also posts this image, originally from the Department of Labor, but with his own annotations added.
OK, I think we can always be skeptical when we’re given a graph like this–we don’t know that it’s not simply a case of a post-hoc fallacy. And we need to consider it in comparison with the still-declining unemployment rate (see graph below, from BLS). But it ought to give us pause.
PPACA was supposed to–in part, not as its primary purpose–help the economy by reducing health care spending. But if it’s causing unemployment, that other dynamic may be wholly overwhelmed (assuming it was ever going to happen).