ObamaCare’s perverse incentives

Robert Samuelson explains how ObamaCare harms the people it is most intended to help.  By requiring, for example, that employers provide insurance to employees who work more than thirty hours per week, employers of part-time, low-skilled, and seasonal employees have a huge incentive to reduce their employees’ hours.

As first reported in the Orlando Sentinel, Darden Restaurants — owners of about 2,000 outlets, including the Red Lobster and Olive Garden chains — is studying ways to shift more employees under the 30-hour ceiling. About three-quarters of its 185,000 workers are already under, says spokesman Rich Jeffers. The question is “can we go higher and still deliver a great [eating] experience.” The financial stakes are sizable. Suppose Darden moves 1,000 servers under 30 hours and avoids paying $5,000 insurance for each. The annual savings: $5 million.

As a reaction to Obamacare, this makes business sense, but in other ways, it doesn’t. Waiters and waitresses going below 30 hours a week will lose income. They make about $15 an hour with tips, says Jeffers. A server who drops five hours would lose $75 a week.

I’ll also add that it is very difficult for people in that position to work a second job: the hours of the first job are so unpredictable that a second job cannot be reliably scheduled around it.  That lost income is pure lost income – difficult or impossible to make up with another job.  (Also, I would presume that most people would prefer to work one full-time job, not two part-time jobs, and that most people would prefer mediocre benefits to getting no benefits in an attempt to get amazing benefits.)


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Filed under Economics, Employer Mandate, ObamaCare

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