Delay of new health law could help job market

9:23 PM, Jul 5, 2013   |    comments
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The job market could get a modest boost from the Obama administration's decision to give large employers a one-year extension to provide health coverage to their employees or face fines.

Some consultants and economists say delaying the health care law mandate until 2015 could set off a round of hiring by small-business owners who had put off expanding their payrolls to avoid the mandate's costs. It could also mean employers will give workers more hours now that they know they don't have to offer health care for another year. Others say the impact will be insignificant.

The government reported on Friday that 195,000 jobs were added last month. But the number of people working part-time who prefer full-time work jumped by 322,000 - a possible sign that some employers reduced the hours of employees so they wouldn't have to provide the health insurance.

Under the Affordable Care Act, businesses with the equivalent of at least 50 full-time workers must offer health insurance to staffers who work at least 30 hours a week, or pay a $2,000-per-worker penalty. The Treasury Department on Tuesday announced that the requirement's effective date will be pushed back from January 2014 to January 2015.

Some companies with 40 to 45 workers have held off hiring so they don't cross the 50-employee threshold. Others have been trimming the hours of employees who typically put in more than 30 hours a week. Federal auditors were expected to examine staffing levels for several months of this year to determine if businesses must comply with the January 2014 mandate.

Now, many small firms "can go ahead and hire that 50th employee," says Kathryn Bakich, senior vice president of Segal, a benefits consulting firm. Those businesses, she says, can pare their workforces next year through attrition if they want to avoid the mandate.

Meanwhile, retailers, restaurants and hotels - which employ many part-time workers and often don't provide heath insurance - can add more hours to employees' schedules.

"It's a temporary reprieve," says Neil Trautwein, vice president of the National Retail Federation. "Hopefully, this will keep more money in people's pockets for a longer period."

Rob Wilson, head of Employco USA, a human resources outsourcing firm, says he likely will advise his clients, including hotels, country clubs and restaurants, that they "can move past the 30-hour rule."

But Malcolm Knapp, a restaurant consultant, says many businesses that have already shifted their payrolls to include more part-time workers are unlikely to reverse course.

"You're not going to go back and forth on policy," he said. "That really drives (employees) crazy."

And J.D. Piro, who oversees the health care law group for Aon Hewitt, a benefit consulting firm, says businesses near the 50-employee threshold that balked at hiring will likely continue to do so.

"I don't think a one-year delay is going to change the dynamic," he says.

Ernie Canadeo, president of EGC Group, a Long Island, N.Y., advertising and marketing firm with 46 employees, says he has no plans to add workers. If sales increased strongly later this year, he says he would not hesitate to boost his staff to 50 despite the added health insurance costs. But if sales growth is moderate, he likely would try to stay below 50, knowing the insurance requirement will kick in in 2015.

Overall, the health care mandate's delay could have a small positive effect on the job market, some economists say. So far this year, small-business hiring - particularly by retailers, restaurants, hotels and some professional firms - has been slowed slightly by the health care requirement, says Mark Zandi, chief economist of Moody's Analytics. Zandi analyzed data from a monthly employment survey his firm compiles for payroll processor ADP.

He estimates that 10,000 to 30,000 fewer private-sector jobs have been created in 2013 as small firms tried to stay below the 50-worker threshold. The impact might have become more significant later this year if the mandate's deadline had not been changed, he says.

But Wells Fargo economist Mark Vitner says many companies had to offset the reduced hours of employees by hiring more part-time workers, boosting employment overall. He says the mandate's delay could crimp hiring slightly.

Paul Davidson, USA TODAY