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Monday, December 2, 2013

Why the Obamacare part-time shift won't hurt or help anyone

Obamacare impacts business profitability
Health insurance costs worry employers
By Dennis Aimes

There has been a lot of hay made recently about the impact that the Affordable Care Act will have on the way that employees in the United States are scheduled and hired.

This opposition has stemmed primarily from businesses insisting that they won’t be able to survive if they are forced to offer their employees insurance. They claim their only option will be to shift their full-time employees to part-time, and most of the noise is coming from the service sector since those employers are less likely than any other to offer health care now.

Economic analysts and social commentators alike have been ringing their hands over how many employees will lose their full-time work, and the fact that most of those workers will be minimum wage already, and therefore least able to absorb the financial hit. While it is true that employers often threaten and even punish their poorest workers for decisions designed to lift those very people out of poverty, in this case their threats are little more than that.

The realities of the service industry

The reality is that most of the jobs in the service industry are part-time, minimum wage jobs. They have traditionally been part-time jobs and they have never come with benefits. Some believe that these positions are still largely filled by teenagers trying to earn some extra money after school or over the summer, but that isn’t the economic reality of the twenty-first century. We’ve become a ‘service-based economy,’ which means that millions of adults struggle to support their families by working these jobs.

Today’s workers don’t apply for food or customer service jobs because they think they’ll make a good living, or because they think they’ll get decent benefits. They apply for these jobs because those are the jobs that are available and for which they are qualified, and those employers have always been happy to shell out as little as possible to those with the fewest alternatives.

The risks of uninsured service employees

Imagine for a moment that you were interested in finding the Typhoid Mary of the 21st century. Would you look in an office setting? On Wall Street? More likely you would look behind a register or in a kitchen. Customer service professionals handle your money and your purchases, and hospitality workers prepare your food and manage the hygiene of your hotel room.

These employees have never been offered insurance by their employers, have always been relegated to part-time, and very rarely creep significantly above the minimum wage. They aren’t offered paid sick days and they can’t afford to see a medical professional, so when the prep cook at your favorite restaurant gets sick he comes to work anyway, and that is a great way to spread illness, not only to the customers but to the rest of the staff.

The cost of insuring the rest

Some business owners have voiced strong opposition to the Affordable Care Act, and many have made claims about the potential costs that could be passed on to customers. John Schnatter, CEO of Papa John’s Pizza suggested that the reforms would be the equivalent of an eleven to fourteen cent increase for each pizza sold. Independent researchers have estimated that it would be closer to three pennies each, but even working with the higher number, most Americans have said that they would be willing to pay a little more in order to ensure the worker preparing their food could have access to health care.

How service employees live today

It is particularly difficult for minimum wage employees to feel sympathy for a restaurant like McDonald’s whose profit margin hovers consistently around 20%. They recently provided their employees with a pamphletdesigned to help them better budget their money. While this may seem like a reasonable item to offer to your workers, upon closer examination it revealed the real flaw in the service industry model.

Their own budget guide assumes that their employees will have a second job and pay only $20 each month for health insurance, and it fails to account for child care, transportation costs such as gas and vehicle maintenance, food, or heat.

Ethical employers who invest in their employees

If all companies treated their employees this way we might have to assume that they really don’t have a choice, but that just isn’t the case. Costco, for example, pays its employees an average of $17/hour, and provides 82% of them with high quality health insurance. The result is loyal and happy employees, the lowest rates of employee theft in the retail industry, and $43 billion in 2012 sales.

A recent Time magazine article put the spotlight on a small but growing chain in the Western US called Winco. This company is often able to undercut Wal-Mart’s prices while treating its employees like an investment. Winco is actually employee owned, which has led to policies such as making health care available to any employee who works more than 24 hours in a week and setting up impressive pensions, a concept generally unheard of in the world of retail.

The actual impact of the Affordable Care Act

For most of the 3.6 million minimum wage workers in the US, and the even greater number of people who have been given less than a dollar raise over that, the reality is that they already have to have two jobs in order to work more than 30 hours a week. At least since the 1990s it has been understood that any job behind a register or in a kitchen will be part-time in order to protect the employer from health care costs. The aspect of the Affordable Care Act that is most likely to impact their lives is the expansion of the Medicaid program, for which they may now qualify.

Employers who prioritize loyalty and engagement in their employees are already offering them the opportunity to survive with one job, and they’ll be just fine under the new law. Employers who prioritize cost cutting at the expense of both their customers and their employees will have to face the consequences of those choices, both financially and in terms of customer perception. Employees who already scrape by on minimum wage will likely be able to get in on one of the socialized health care options in the US, and that will genuinely help millions of Americans.

Abuout the author: Dennis Aimes is an insurance adviser and a writer for HBFinsurance in Australia.

Image license: 401(K) 2012, CC BY-SA 2.0