Despite Employer Mandate Delay, Restaurants Shifting from Full-Timers to Part-Timers

When you tell people you’ll charge them more money if they hire people, they’re probably going to stop hiring. If you tell them that the cost of their doing business is rise dramatically when they pass a certain number of full-time employees, they are likely to reduce the number of full-time employees and hire more part-time ones. And that’s exactly what seems to be happening with Obamacare.

The Wall Street Journal reports about a trend in restaurant hiring: Employers are shifting to part-time workers rather than hiring or even keeping full-time employees in order to avoid the added health-insurance costs of the health-care law.  

Restaurants and bars have been adding an average of 50,000 jobs monthly since April—about double the rate from 2012. In June, they added a seasonally adjusted 51,700 jobs, up from May’s 47,900 tally, but below April’s 51,800. Overall, leisure-and-hospitality establishments hired more workers than any other industry in June, accounting for 75,000 of the 195,000 jobs added last month, according to the most recent Labor Department report, although economists cautioned against reading too much into one month’s preliminary figures.

Views differ on exactly what is driving the hospitality industry’s pickup. Other factors likely also were behind it, including the addition of new restaurants as well as a move to staff up hiring after scaling back during the downturn, according to some restaurant owners and industry experts. But a number of restaurants and other low-wage employers say they are increasing their staffs by hiring more part-time workers to reduce reliance on full-timers before the health-care law takes effect.

“I’d be surprised if the Affordable Care Act didn’t have something to do with” the pickup in part-time hiring, said Paul Dales, senior U.S. economist at Capital Economics. “Companies don’t want to pay for health care unnecessarily if they can avoid it, so they’ll try to avoid it.” However, he said “the effects will be harder to discern in the data.”

As the Journal explains, the cost of adding full-time employees will go up significantly under the Affordable Care Act:

The cost for small firms to comply with the health law will depend largely on the number of additional full-time employees that sign up for employer-sponsored coverage. Average annual premiums for employer-sponsored health insurance in 2012 were $5,615 for single coverage and $15,745 for family coverage, according to the Kaiser Family Foundation. That is up from $3,083 and $8,003, respectively, in 2002.

The whole thing is here. It will be interesting to see if this trend slows down now that the administration has announced that it will delay for a year the implementation of the mandate requiring most employers to offer insurance to full-time workers.

Last week, Megan McArdle had a good post looking at the implications of the employer-mandate delay that included some really interesting thoughts by Yuval Levin.