Effects of Obamacare

By Anonymous Sophomore

As small and medium size businesses prepare for the start of the Affordable Care Act, frequently referred to as Obamacare, there will be an increase in the number of part-time positions offered by businesses and thus an increase in the number of Americans who are underemployed.

When it begins, the Affordable Care Act will require businesses to provide health benefits to full-time employees and their dependents, if a business employs over 50 full-time workers, according to the Department of Health and Human Services.

Once businesses are required to provide healthcare to full-time employees, this will increase the cost of an individual employee for the employer. The labor demand curve is downward sloping. Therefore, as the cost of one full-time employee increases, the business will not offer as many full-time positions.

To adjust for this decrease in the number of workers companies are able to afford, they will offer more part-time positions. The advantage of part-time positions is that companies are not required to supply them with healthcare. They are also not included in the count that could potentially put businesses over the 50-employee line that requires benefits to be given. Part-time employees also provide employers with greater flexibility. One can easily be made a full-time employee if a position opens within the company.

“Shifts from full-time to part-time work will be remarkably more attractive for employers,” said University of Chicago professor, Casey Mulligan, in an article he wrote in The New York Times regarding the effects of The Affordable Care Act.

In an economic environment where the unemployment rate is high and workers are more desperate for jobs (much like the current economy), there is a greater number of employees with a lower than normal initial asking wage. These individuals will likely take the newly created part-time positions.

Once these individuals take the job, they will be considered employed by the Bureau of Labor Statistics. The unemployment rate will not, however, account for the fact that the newly employed individuals had been looking for a full-time job, but took part-time jobs due to the lack of full-time positions. This side effect of the current employment survey process is known as underemployment.

There will also be a group of job seekers who choose to hold out and continue the search for a full-time position. Part-time positions typically offer lower wages than full-time. The increase in the length of their job search will cause greater frictional unemployment. Frictional unemployment is unemployment caused by the time it takes workers to find job openings that fit their skillset and asking wage.

In conclusion, while the Affordable Care Act offers a potential solution to the health care crisis facing Americans, the unintended consequences are an increase in the number of Americans forced to take part-time positions. This deepens the errors found in monthly unemployment numbers (those who are underemployed) and will increase frictional unemployment as workers seek full-time positions.