Health & Human Services

Is Obamacare the Reason Governments Are Scaling Back Part-Timers?

Municipalities across the country are cutting part-time workers' hours. Some say it's because of the new health insurance mandate, but others say doing so will actually cost governments more money.
by | November 2013
A worker is punching his time card with the automatic clock.
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Middletown Township, N.J., reduced the hours of 25 part-time workers. Bee County, Texas, announced it would allow part-time workers to clock in only 24 hours per week when the new fiscal year starts Oct. 1. Lynchburg, Va., administrators have cut hours for about 40 part-timers. Chesterfield County, Va., near Richmond, expects to cut the hours of “several hundred” part-time employees. Brevard County, Fla., libraries reduced hours for 37 part-time employees. And Chippewa County, Wis., will eliminate 15 part-time positions. So what’s prompting this war on part-timers?

It’s the Affordable Care Act (ACA), or at least that’s what public officials in these cities are claiming. They say that the cost for mandated health insurance coverage on those working 30 hours or more per week is too much. And even though the mandate for such coverage was pushed back a year, until January 2015, they’re moving ahead now with cuts. It raises the question then, is this smart fiscal planning or shortsighted political posturing?

So far, this “phenomenon” may be nothing more than a mirage. “I think it is incorrect to assume that a lot of public or private employers are changing around work schedules when it is still 16 months before [that mandate goes] into effect,” says Gary Burtless, a senior fellow at the liberal-leaning Brookings Institution. That take is echoed by White House Council of Economic Advisers Chairman Jason Furman, who told The Washington Post, “Since the ACA became law, nearly 90 percent of the gain in employment has been in full-time positions.”

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Still, for those who are trimming part-time hours, Burtless is skeptical about the timing. “I think a lot of people already have this narrative in their minds that the ACA is a disaster and it will cause all kinds of problems,” he says. “So every time something fits into that narrative, they use it as justification” for actions like these. Employers may also give an explanation that doesn’t match their actual motivations. “That strikes me as being true where people talk about cutting back hours,” says Burtless. “Why would that be induced by the ACA? Even if it were, why chop them down to 29 hours and not 20?”

There are also some questions about the financial benefits of this move. Since most employee benefits are fixed-cost, it doesn’t matter whether they work 20 or 40 hours a week. Assuming the workload doesn’t change, the employer would presumably have to hire more part-timers to get the job done. “If you have to have twice as many workers at 20 hours as you did at 40 hours,” Burtless says, “then these fixed costs will increase your employment costs,” offsetting much of the savings gained by not insuring them in the first place. “Some things you have to provide, and they cost something no matter what, period. The more employees you have, the larger those costs loom in your wage and compensation bill.”

In most municipalities the ACA’s 30-hour threshold wouldn’t matter anyway. “I’m not sure that [30 hours] is the law in most municipalities. I think it may be 20 hours a week,” Burtless says. “If people work 20 hours a week here at Brookings, we still pay their insurance.”

Regardless, contracts with public unions in many cities would prevent such cuts in the first place. “I can easily imagine that in municipal employment there may be negotiated rules that constrain public employers,” Burtless says. Besides, the Employee Retirement Income Security Act rules protect against employers providing benefits that have especially high value to highly compensated workers, and not making them available to everyone else. “You can’t have a system,” he says, “where only certain employees have access to important benefits.”

For Middletown’s part, its administrator, Anthony Mercantante, told The Washington Post that it’s the uncertainty that’s driving his town to act now. “It’s not something we can take on, particularly when we don’t know some of the other ramifications of the Affordable Care Act. There are far more questions than answers right now.”

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