Wednesday, December 12, 2012

How Obamacare Can Reduce Unemployment

Okay, follow closely.  Let's say you have some work that needs done that requires 120 person-hours a week.  Originally you might have hired 2 people to work 60 hours a week.  Then after overtime became an issue, you hired another person and cut everyone back to 40 hours a week.  Then came benefits for full time employees, so you went to 4 people working 30 hours a week.  Now with Obamacare, you would have to provide health insurance for people working 30 hours a week, so you go to 6 people working 20 hours a week.

Of course, this only works in jobs where there is a ready supply of new employees.  Those industries that can't hire readily just have to adjust to what they can afford, and those are the ones that publicly announce layoffs.  The hiring from Obamacare is more in low-skill service work, which goes relatively unnoticed.  Of course, there is no more money being paid to employees, so it's not really helping the economy, but it makes Obama look good.

So, the trend I expect to be reported over the coming months is a mild drop in the unemployment rate with a sharp increase in the underemployment rate, i.e., people who want to work full time but only have part time jobs.

1 comment:

  1. Or there is a switch away from items that are labor intensive to produce on the demand side, and it...all gets fuzzy.

    In general (and this goes well beyond Obamacare), increased automation has been a strong substitute away from labor. Historically we have been able to put the people freed up to work in other areas, but I don't see a compelling reason this has to keep occuring.