The Obamacare Effect: Small Business Curbs Hiring

The WSJ explains the impact of Obama’s signature achievement on small business hiring. As James Freeman points out, O’Care’s broken incentives almost ensure that low-wage workers will have a harder time raising their incomes.

A new survey demonstrates the Affordable Care Act’s negative impact on employment. According to the Journal, “nearly half of small-business owners with at least five employees, or 45% of those polled, said they had had to curb their hiring plans because of the health law, and almost a third—29%—said they had been forced to make staff cuts, according to a U.S. Bancorp survey of 3,173 owners with less than $10 million in annual revenue that will be released Thursday.”

Given how much the President talks about income inequality, it is perhaps ironic that his signature achievement is preventing people from earning incomes. Even though many businesses won’t have to provide health insurance until next year or later, the Journal reports that “the law is already having a lasting impact on how lots of owners choose to run their companies.”

Businesses with fewer than 50 employees will remain exempt from many of ObamaCare’s most onerous provisions—and from many other costly federal mandates. This has created the phenomenon of “49ers”—companies that grow to 49 employees and then cap their workforces to avoid expensive federal requirements. Needless to say, this is not supportive of job creation.

And we’ve previously described the new ObamaCare-induced phenomenon of “29ers”—employees held below 30 hours of work per week to avoid counting as full-time workers eligible for employer-provided health insurance. As a Journal editorial explained last year, “The savings from restricting hours worked can be enormous. If a company with 50 employees hires a new worker for $12 an hour for 29 hours a week, there is no health insurance requirement. But suppose that worker moves to 30 hours a week. This triggers the $2,000 federal penalty. So to get 50 more hours of work a year from that employee, the extra cost to the employer rises to about $52 an hour—the $12 salary and the ObamaCare tax of what works out to be $40 an hour.”

The broken incentives in ObamaCare seem almost designed to ensure that low-wage workers have a harder time raising their incomes. But we’re betting the President will find someone else to blame for inequality.