Wednesday, July 24, 2013

The New Economics of Part-time Employment, Continued

Copyright, The New York Times Company

A revised definition of part-time employment may have some popular appeal, but it will not repair the Affordable Care Act’s disincentives for full-time employment or its extra costs for taxpayers.

Part-time employment rarely includes health benefits. The lack of health benefits and the lower pay for part-time work have traditionally discouraged people from taking part-time jobs rather than full-time jobs, but both of those attributes of part-time jobs are about to change.

I explained in an earlier post how, in many cases, the Affordable Care Act would almost entirely eliminate these two shortcomings of part-time employment by offering access to generously subsidized health insurance to part-time employees while denying it to most people who work full time. As a result, more people will work part time (under the law, less than 30 hours a week) rather than full time, and this will occur at significant taxpayer expense.

Two senators, Joe Donnelly, Democrat of Indiana, and Susan Collins, Republican of Maine, are proposing to tweak the Affordable Care Act by changing the definition of part-time work to include any work schedule of 39 hours a week or less. They say the change conforms with traditional definitions of full-time work and will prevent workers from having their work schedules cut.

Their proposal is likely to have the opposite effect. Although it may be true that their proposal would prevent cuts in hours for those now working, say, 35 hours a week, it would be likely to cause cuts for employees working 40 to 45 hours a week, because staying short of the 40-hour threshold would be closer to their current work schedule than staying short of the law’s 30-hour threshold.

More important from an economic point of view, the 40-hour threshold would further magnify the already strong disincentives for working full time. The table below illustrates what may happen.

The left column of the table shows the economics of a full-time position (40 hours a week). Between employer health insurance premiums and the employee paycheck, this position costs the employer $56,000 a year, or about $28 an hour. The full-time employee’s pay after his portion of health insurance premiums are withheld is $42,000.

Although covered by health insurance, the employee and his family incur $3,000 in additional health costs from health insurance deductibles, co-payments and so on ($3,000 is typical for a family of four with a comprehensive health plan). The employee also has work expenses for commuting, child care and so on, which I assume to be $100 a week when working full time.

The part-time columns of the table show two situations for a part-time position with the same employer cost an hour of $28. The middle column is the situation I discussed earlier, in which the full-time threshold is the 30 hours contained in the law. The right column is the situation that would apply if Senator Donnelly and Senator Collins have their way and workers become part-time by cutting their weekly hours to 39.

Because the part-time position is 39 hours a week, the annual employer cost is $54,600. All of the $54,600 consists of cash compensation for the employee, because the part-time position does not include health insurance.

The part-time employee has to pay for his own health insurance, but the new law limits his premiums to $3,947 (the law pays the other $8,463 from the Treasury) and limits his out-of-pocket health costs to $4,590 (the law pays the other $510; by design the law increases deductibles and co-payments but uses subsidies to offset those increases for low- and middle-income families).

Net of work expenses ($100 a week for both 40- and 39-hour positions) and health expenses, the 39-hour position pays $41,063, significantly more than the full-time position’s $34,000.

By taking a 39-hour position, the employee can have comprehensive health insurance coverage and actually make more money than he would in a full-time position. In effect, the new subsidies totaling almost $8,973 more than fully offset, from the point of view of employers and their employees, the loss of production that occurs from working 39 hours a week rather than 40.

It’s one thing for public policies to present workers with a small reward for working full time. But the proposal from the two senators would put millions of people in the position of having to pay – in the form of less disposable income – for the privilege of working full time. When millions of workers choose part-time rather than full-time work under the Donnelly-Collins proposal, it will be taxpayers who pick up the tab.

The Affordable Care Act is full of disincentives. But tweaking the law without carefully considering incentives is likely to increase the law’s damage to the labor market and its depletion of taxpayer funds.

28 comments:

Unknown said...

Unemployed people can't always rely on their income protection cover to get by. Having a part time job should also be considered.

JOJO said...

The ACA will improve the nationwide regular minor work income tax amount about 12 times more (sic) than the 2006 “Romneycare” health change law improved the Boston regular amount. Accountants London

JOJO said...
This comment has been removed by the author.
JOJO said...

"Complete of the via stage thesiss, involved too prolix commentarys to each framework in with, our expert be a factor conscious writers can offer you with along the character kind papers information use you need to increase Food preparation Container Span" http://snapfragrance.net/calvin-klein-cologne//

JOJO said...

Although it may be true that their offer would prevent reduces in time for those now operating, say, 35 time per 7 days, it would be likely to cause reduces for workers operating 40 to 45 time per 7 days, because remaining brief of the 40-hour limit would be nearer to their current time-table than remaining brief of the law’s 30-hour limit. lipozene

Yasir said...

the impacts are complex; a study by Satoshi Kanazawa of the London, uk University of Financial aspects, which indicates that women with.bubblegum casting

JOJO said...

Affordable Care Act by changing the definition of part-time work to include any work schedule of 39 hours a week or less. They say the change conforms with traditional definitions of full-time work and will prevent workers from having their work schedules cut. carpet cleaners penarth

JOJO said...

The ACA will increase the nationwide regular minor work income tax amount about 12 times more (sic) than the 2006 “Romneycare” health change law improved the Boston regular amount. free ps4

JOJO said...
This comment has been removed by the author.
JOJO said...

They say the change conforms with traditional definitions of full-time work and will prevent workers from having their work schedules cut. is bubblegum casting legitimate

JOJO said...

They say that this effectively-tax-cut will decrease rising prices and, through a Phillips bend research, decrease lack of employment. It's not the way I would strategy it, but that's not scams. The scams becomes noticeable on web page 36 where they observe that areas of wellness change increase minor tax prices. manhood enlargement

JOJO said...

Two senators, Joe Donnelly, Democrat of In, and Leslie Collins, Republican of Maine, are suggesting to modify the Cost-effective Proper care Act by changing the meaning of part-time perform to include any time-table of 39 time per 7 days or less. They say the modify is in accordance with traditional explanations of full-time perform and will avoid workers from having their perform plans cut. Asiapoker77

JOJO said...

Machines are expensive to design and manufacture, and most of the people directing the creation of machines have an eye on the rate of return: the economic value of a finished machine as compared to the costs of creating it. The more profitable investments will, by definition, be in machines with a higher rate of return. web design manchester

JOJO said...

The earth is already occupied by quite a number of people, and a machine like Frankenstein or C-3PO might find itself with seven billion competitors. Buy Twitter Followers UK

JOJO said...

Insurers and the govt will heavily advertise the new programs. Most important, middle- and low-income family members may be eligible for a valuable govt subsidies that will serve to reduce rates and out-of-pocket wellness expenses. london accountant

JOJO said...

Surprising that Los Angeles is so close to Detroit in this measure. What a sad statement for Southern California. Glad I'm not one of the. new iherb discount

JOJO said...

As a result, more individuals will continue to perform part-time (under the law, less than 30 time a week) rather than fulltime, and this will occur at significant tax payer cost. bed bath and beyond free shipping coupon

JOJO said...

More individuals have to read this and perceive this side of the story. I cant consider youre no more fashionable because you definitely have the gift. best tasting e liquid

JOJO said...

Obviously supply and demand is an extremely powerful framework, but you grossly exaggerate the strength of what you can conclude from just it and so little other data and analysis. Buy Twitter Followers UK

JOJO said...

Although areas of the ACA develop “notches” and “cliffs” into family price range places – that is, infinitesimal income durations over which minor tax prices are unlimited – my quantitative outcomes are not a impact of those steps or coves. roofing

Yasir said...

Infant death amount is a measure for the our health of a country and in majority of folks that analyzed two years of data from member countries of the Globe Wellness Company. dentist in round rock

Yasir said...

This high-power transceiver (HPT) allows regularity upconversion from L-band to Ku-band wavelengths. It includes. executive desk

Yasir said...

Team which is able of including. For if we did not do this, and then the conversation can be developed that why bequest. www.ddriverss.com

Yasir said...

He says the vegetation will price $595 to produce, creating $284 to pay cash rental and provide to see close relatives associates living. click to read

JOJO said...

I am confident that these industries will continue to offer health insurance to their employees in much the same way that they have in the past. Click Here

Yasir said...

That being said, you did not discuss the impact on the deficiency of profession extensive range of. Teamspeak Server

Usama shaikh said...

I extremely projected you and warranted can contain up for additional mails like this. articulate gratitude you most. Ian Filippini Santa Barbara

Usama shaikh said...

I am confident that these industries will continue to offer health insurance to their employees in much the same way that they have in the past. nailartbg