The national unemployment rate edged downward to 7.5 percent in April, the lowest level since December 2008. Private employers added 176,000 jobs while the public sector lost 11,000 jobs as governments at all levels feel the impact of budget cuts.
The jobs data helped ease worries of a slumping economy. According to revised federal Labor Department data, the economy added almost 200,000 jobs a month this year, news that sent the Dow Jones to a record high before closing at just below 15,000 on Friday. But employers are still cautious as they look ahead to ongoing federal sequestration and economic upheaval throughout Europe.
Another factor here at home weighing on future hiring decisions by small and large businesses, however, is the rising costs of health insurance being imposed by the Affordable Care Act. It mandates employer-provided insurance coverage for businesses with 50 or more employees who put in at least 30 hours a week. The mandate also applies to governments that have joined private sector employers in pushing to modify the law.
As companies look ahead to expansion, they will have to weigh the added insurance costs, not just on new hires but current employees who will have to be covered. Failure to provide insurance could result in an annual fine of $2,000 per worker. That has several major businesses and some states not just holding off on increasing payrolls but also cutting hours to keep employees under the 30-hour threshhold to limit their liability.
The Wall Street Journal reports that Virginia is cutting the workweek for 37,000 state employees to 29 hours. In Iowa, some school districts have considered limiting bus drivers, cooks and other employees to 29 hours a week or less. Slashing hours and wages leaves less discretionary income for consumers forced to make ends meet with less pay.
Some firms are not hiring so they can stay below the 50 workers that trigger the law. Others are opting not to provide insurance but pay a less costly penalty.
Rather than solve a problem, the mandate then lowers the baseline for full-time employment from 35 or 40 hours to less than 30 hours a week. It also helps explain why the average workweek for non-farm employees declined in April, according to the Bureau of Labor Statistics, and may continue to decline.
Compounding the problem is the failure of the administration to implement as planned a Small Business Health Options Program that would create an exchange with a range of affordable insurance plans for employers and employees to choose from. Instead, the federally run health exchanges will provide only a single plan.
The Journal reported that organizations such as the National Restaurant Association and the National Education Association along with school districts are pushing for changes in the law, particularly increasing the number of hours required to meet the mandate. The Senate in March approved a budget amendment that would redefine full-time employment, but that is not expected to make it through the House.
Although Republicans are generally opposed to the health law, some are hesitant to amend it since it could weaken support for outright repeal, which is not likely to happen during the Obama presidency.
Instead, Congress should turn its attention to adapting the law in response to circumstances that were not foreseen or given adequate thought in the rush to passage.
Businesses then could make decisions that are market driven rather than respond to higher costs imposed by government intervention in the marketplace.