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Health Insurance reform is driving under-employment

Dec 12Jeff Matthews

The press has focused a lot of attention on the official unemployment rate in the United States.  Just recently the rate finally dipped below 8 percent for the first time since early in 2009.  But the unemployment rate does not tell the full story.  We have a huge group of people who are working below their skill level and working less than full-time due to the poor economy.

Employers have for a number of years moved many positions from full-time to part-time with the express intent of not having to provide benefits to those employees.

Under the Patient Protection and Affordable Care Act, the large employer rules set the 2014 threshold for employers to provide a minimum level of insurance or paying a penalty at 30 hours per week.  So employers are limiting hours for part-time employees to ensure that the employer does not have to provide health care coverage.

The impact of this practice is that part-time employees end up with no insurance coverage and lower overall pay.  One might argue that the part-time employees can simply get a second job to supplement the lack of sufficient wages.  But there is that pesky high unemployment rate which isn’t providing a demand for workers.  And the employee would have to find a second job that would be flexible enough to allow the employee to work both shifts.  After coordinating two jobs, the employee has no guarantee of benefits as neither employer has to provide benefits to part-time employees.

You may be thinking that this practice is focused on the food and service industries and you would be correct.  In fact, Darden Restaurants which owns Olive Garden, Red Lobster, and Longhorn Steakhouses has been cutting back employee hours.  Applebee’s and Papa John’s restaurants are also following these practices.   The hotel firm Pillar Hotels & Resorts, which owns 210 franchised hotels, is focused on hiring more part time workers.

But the problem is not limited to just food and service industries.  Youngstown State University recently announced a policy of firing any part time employee who violates their 29 hour limit.  And the practice is not just in education, many communities and local public employers are following similar practices of filling previous full time roles with multiple part-time employees.

I doubt the framers of the health care rules intended to reduce the pay of low-wage employees while excluding them from the benefits of health care, but that is exactly what has been accomplished.

B2B CFO®

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