ACA/Obamacare Employer Mandate: Hourly Work Week Trends In Low Wage Industries

“To understand both why the employer mandate needs fixing and what should be done, it helps to look at the data.”

“Among private industries where pay averages up to about $14.50 an hour, 30 million workers clocked the shortest average workweek on record in November — 27.45 hours — before a further drop in December and January that was at least partly weather-related.

On a net basis, the 644,000 non-management jobs added in these low-wage industries in 2013 through November averaged just 17.9 hours per week.

These grim data points suggest that too-few work hours, as well as low pay, should be part of the conversation on reducing inequality.

Yet these trends have been ignored, ironically, because of growing inequality in work hours. Because the rest of the private sector (managers and higher-paying industries) is clocking a longer average workweek than before the recession, making workforce-wide data look benign, economists haven't noticed that low-wage work hours are shorter, on average, than they were at the depth of the recession. (see two recoveries chart)

An honest discussion over ObamaCare's part-time effect must start with the recognition that something is seriously depressing the hours of low-wage workers.

Correlation — the drop in the low-wage workweek just as low-wage employers had a significant new incentive to cut work hours — does not prove causation. But there is other evidence also pointing to ObamaCare as a principal factor.

Anecdotes of employers cutting work hours to minimize ObamaCare fines have piled up in an array of industry groups where the workweek has been shrinking. Relative to the start of 2013, average weekly hours in November were down 1.2% at limited-service restaurants; 1.4% at supermarkets; 1.5% at clothing stores; 2.1% among providers of home care services to the elderly and disabled; 4.1% at sporting goods, book, music and hobby stores; 4.5% at home-center stores; and 4.9% at general merchandise stores.

The White House has said that a good way to test for an ObamaCare effect on work hours is the ratio of workers usually clocking 31- to 34-hour weeks vs. the number putting in 25- to 29-hour weeks. If that ratio were stable, it would be a sign that employers weren't adjusting work hours below the 30-hour mark. But in the fourth quarter of 2013, this White House-endorsed ratio fell to a 13-year low of 0.6, down 15% from a year earlier.

Predictably, that decline was concentrated in the low-wage segment. Among workers earning $7.25 to $10 an hour, this ratio of workers clocking just above ObamaCare's full-time threshold vs. those just below it sank 24% from the fourth quarter of 2012.

The claim that all job gains in 2013 were part-time was hogwash, but that does appear to have been the case among workers earning within a few dollars of the minimum wage.

An analysis of usual-hours-worked data suggests that all net new jobs in 2013 among hourly wage earners making $7.25 to $10 an hour had workweeks below 30 hours. (See article and accompanying note.)

While the more reliable workweek data from the establishment survey turned lower in the spring, the weakness in the household workweek data didn't become really obvious until the fourth quarter. But such a lag is largely to be expected, because the household survey instructions define "usual" as at least 50% of the time over the prior four or five months.

Because the establishment survey workweek data are telling a similar story, it's much less likely that the more volatile household survey hours-worked data are sending a false signal.

After another month or two of data that aren't infected by bad weather, it should be beyond dispute that ObamaCare's impact on low-wage workers is significant. The question, then, will be what to do about it.” - Fixing ObamaCare Employer Mandate For Low-Wage Workers, Investors Business Daily, 03/13/2014

Link to the entire article appears below:

http://news.investors.com/blogs-capital-hill/031314-693091-fixing-obamacare-employer-mandate-to-ease-hours-impact.htm


　

　

　

　


　

Small Business Intentions? Negative Capital Outlay, No Hiring for 2013

“U.S. small-business owners' net capital spending intentions for the next 12 months plunged to
-14 in November, the lowest level in more than two years, according to the Wells Fargo/Gallup Small Business Index.”

"Consistent with these negative expectations, owners' intentions are to reduce their capital spending plans and their hiring intentions over the months ahead."

- Gallup economy, 12/13/2012

Full story below:

　

http://www.gallup.com/poll/159212/small-business-owners-pull-back-capital-spending-plans.aspx

Current Labor Participation Rates: an indicator of an increase in labor participation rates within the subterranean economy?

The subterranean economy, in a nutshell, is non-reported work which means non-reported wages meaning zero tax revenue for state. The subterranean economy is as simple as the neighborhood kid mowing lawns for cash and as sophisticated as organized crime. Keep the subterranean economy in mind for a moment.

Within the study of labor economics is the phenomena of the discouraged worker. The discouraged worker is basically that worker that has given up looking for employment as they feel its fruitless given current employment opportunities. These same discouraged workers are attracted back into the labor force due to improving headline unemployment numbers. Hence discouraged workers can make a headline unemployment rate [unemployment measurement u3] look better than it actually is by leaving the work force and hence the total work force shrinks yet employed remains constant giving the phenomena of the unemployed number shrinking. Conversely, when the discouraged worker is attracted back to the labor force the unemployment rate flattens then increases as a flood of discouraged workers perceive employment opportunity therefore the work force expands In the short run, this expanded work force is not immediately employed hence headline unemployment rises.

Therefore labor participation rates change at the margin depending on how many discouraged workers enter or leave the work force. Today the labor participation rate is historically low. What if the decrease in labor participation rates is merely an indicator of an increase in labor participation rates within the subterranean economy?

Would the failure of, or speed by which the discouraged worker is attracted back to the labor force be a function of and/or an indicator that the “labor” is in fact engaged, albeit in the subterranean economy?

Many people consider the subterranean economy as some abstract and singularly organized crime type of underworld. Nay, nay. The subterranean economy is real and comes in many forms and many levels within those forms. That is to say, it’s a real economy with real dynamics. Further, much like the phenomena of welfare, leaving subterranean employment and entering the surface economy comes with a disincentive in the form of wages after tax (as in welfare, wages in the subterranean economy may exceed employment available in the surface economy, the wages thereof, wages that after tax are below the subterranean economy non-taxed wage, hence rationally staying in the subterranean, as in rationally stay on welfare becomes the choice when the person weighs total revenue after tax: subterranean wage or welfare receipt vs. taxable employed wage after tax).

If one sees a statistical failure of the discouraged worker to be attracted back to the labor force, would that be an indicator that the “labor” is in fact engaged albeit in the subterranean economy? If in fact labor is pervasively engaged in the subterranean economy, one would expect to have some level of rigidity at the margin regarding reentering the labor force and leaving a subterranean wage position (wage rationality mentioned above). Finally, if the subterranean wage position is vacated, and given the current army of discouraged workers numbering in the millions, does another discouraged worker merely fill the vacated subterranean position before entering the surface economy labor force (like a halfway house on the way to the surface economy participation) hence the population of the group "discouraged worker" falls slower than one would otherwise anticipate?

Notes:

(1)Measuring the Non-Observed Economy. http://www.oecd.org/dataoecd/9/20/1963116.pdf

(2)The "underground economy"and BLS statistical data.
http://www.bls.gov/opub/mlr/1984/01/art1exc.htm

(3) What is the Labor Force Participation Rate? http://economics.about.com/od/unemploymentrate/f/labor_force.htm

(4) Santelli: 1.2 Million Fall Out Of Labor Force As Participation Rate Hits 20-Year Low, Real Clear Politics. http://www.realclearpolitics.com/video/2012/02/03/santelli_12_million_fall_out_of_labor_force_as_participation_rate_hits_20-year_low.html










　

Unemployment Insurance is Insurance?

Not everything named insurance is insurance. - Thomas Sowell

Rising unemployment insurance taxes?

"Rising unemployment has placed such a burden on states that 30 of them owe the federal government $42 billion in money borrowed to meet their unemployment insurance obligations. Three states already have had to raise taxes to begin paying back the money they owe. More than 20 other states likely would have to raise taxes to cover their unemployment insurance debts. Under federal law, such tax increases are automatic once the money owed reaches a certain level.

Under the proposal, the administration would impose a moratorium in 2011 and 2012 on state tax increases and on state interest payments on the debt.

In 2014, however, the administration proposes to increase the taxable income level for unemployment insurance from $7,000 to $15,000. Under the proposal, the federal unemployment insurance rate would be adjusted so that the new higher income level would not result in a federal tax increase, the person familiar with the plan said." (1)

How is your state doing?

"Due to record high unemployment claims and in many cases poor financial planning, 25 states have run out of funds and been forced to borrow from the federal government, raise taxes or cut benefits. Increasingly, those fiscal woes are landing at the doorstep of business owners and unemployed workers. Employers in 36 states face unemployment insurance tax increases ranging from a few dollars to nearly $1,000 per worker for 2010, and six states have taken steps to cut back or freeze benefits". (2)

You can find a search-able data base for each state regarding tax increases and/or benefit cuts associated with state unemployment insurance at the following link:

http://projects.propublica.org/tables/unemployment-tax-increases-by-state-2010

Which states unemployment funds are bankrupt and borrowing atop of bankruptcy?

"The unemployment insurance system is in crisis due to a combination skyrocketing unemployment and – in some cases – poor planning. A record 20 million Americans collected unemployment benefits last year, and thirty states have run out of funds and been forced to borrow from the federal government, raise taxes, or cut benefits. In many other states the situation is deteriorating fast. Using near real-time data on state revenues and the benefits they pay out, we estimate how long state trust funds will hold up. Click on a state to find the latest, plus historical data, and details on tax increases and benefit cuts." (3)

The following is a link to a map showing which states unemployment funds are not only bankrupt but are borrowing to boot:

http://projects.propublica.org/unemployment/

Unemployment insurance is insurance? A social insurance safety net?

Unemployment insurance is not "insurance" in the traditional sense. It looks like insurance, is portrayed as insurance, is sold by politicos as insurance, has insurance in its name, but sorry its not insurance.

Unemployment insurance, like most social insurance schemes, is not a reserved insurance plan as found in the realm of private sector insurance. Rather its a quasi-reserved scheme which depends on the taxing ability of a central government to supply benefits. Unemployment insurance suffers from the same basic problems that exist in other social insurance schemes such as Medicare, Social Security and your newest friend ObamaCare.

Social insurance schemes work nicely as long as no one uses the benefits. What? Insurance is to pay for sudden claims? That you are transferring a risk for a consideration. If a loss occurs then your consideration paid is your basis for your ability to make claim. Then why does the social insurance scheme only work if you don't make a claim? That makes no sense!

It makes total sense. You see, a social insurance scheme is not reserved to pay claims or is only thinly reserved. When claims roll in the quasi-reserve is quickly depleted. The reason the reserve is quickly depleted in that the system is based on "pay as you go". The pay as you go system quickly breaks down when current claims exceed current tax dollars flowing into the plan. The result being an increase in tax and a rationing of benefit. Its an old story.

The political-economy of disincentives followed by more disincentives

Politicos at the federal level used borrowed money to create a disincentive to work (the time period from 26 weeks to 99 weeks of unemployment benefits). The states used borrowed money as well [borrowing from the borrower i.e. feds] to create a disincentive to work (give the scheme the benefit of the doubt and say the marginal end of the 26 weeks creates a disincentive).

Wait! Its a social safety net that helps the unemployed. Yes and no. First we have to understand that as far as an insurance plan its a political mirage that doesn't pay the benefit advertised. That the benefit paid merely results in an increase in taxes paid and/or a reduction in benefit paid. However, studies show that when people collect benefits that on average people stay on the benefits until the last four weeks before the benefit ends. Hence we have a social safety net that creates a moral hazard of staying on the benefit until the end of the benefit period which is then a disincentive to seek employment, on average, in an expeditious fashion. (4)

Politicos through the mechanism of government have gone way beyond the moral hazards associated with 26 weeks of unemployment and have created 99 weeks of unemployment. The disincentive to seek work has exponentially increased. Further, there is a grand difference between seeking work near the end of a 26 week period vs. the end of a 99 week period.

Creating disincentives is bad economic policy. However, if you borrow money to create a disincentive, that is pure madness. Moreover, if sub-governments [states]borrow money from a central government, who is simultaneously borrowing, you are then borrowing from the borrower to create disincentives which is maximum insanity.

Welcome to The Asylum for the Disincentive Borrower. Those that have created disincentives go onto create yet another disincentive: doubling the unemployment "insurance" tax. Hence politicos through the mechanism of government have created disincentives through 99 weeks of unemployment insurance merely to turn around and create an additional disincentive for firms to hire those that are in fact unemployed.

Exactly what kind of insane exercise is this little trip into the vortex of disincentive? Once politicos have entered the vortex of disincentive they somehow portray this entire exercise as being beneficial to John and Jane Goodfellow. How so? Politicos then frame this disincentive boondoggle as economic stimulus!

Let me say that unemployment insurance… is one of the biggest stimuluses (sic) to our economy. Economists will tell you, this money is spent quickly. It injects demand into the economy, and it’s job creating. It creates jobs faster than almost any other initiative you can name. - Nancy Pelosi (5)

Notes:

(1) http://www.canadianbusiness.com/markets/headline_news/article.jsp?content=b5884614&utm_source=markets&utm_medium=rss

(2)http://projects.propublica.org/tables/unemployment-tax-increases-by-state-2010

(3)http://projects.propublica.org/unemployment/

(4)http://townhall.com/columnists/ThomasSowell/2010/08/27/moral_hazard_in_politics

(5) http://blog.heritage.org/2010/07/07/pelosi-unemployment-benefits-biggest-stimulus-for-economy/