Fed Ponders Part-Time Job Shift as Obamacare Role Questioned

Friday, 19 Jul 2013 10:08 AM

 

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Bailey Brewer, 28, is a writer with a graduate degree in journalism. She’s been employed since the start of the year as a temporary office worker, unable to find a full-time job.

“The part-time thing, I’m really grateful for the work, but it’s also really frustrating because nothing is renewable,” Brewer said. “I want to feel settled in Los Angeles.”

Brewer isn’t alone. The number of workers holding full-time positions fell in the U.S. in June as part-timers hit a record after rising for three straight months, according to the Bureau of Labor Statistics household data. Part-time employment has been outpacing full-time job growth since 2008. Economists cite still-tough economic conditions as the root cause, with some saying President Barack Obama’s 2010 healthcare law exacerbates the trend.

U.S. Federal Reserve Chairman Ben Bernanke told a House committee July 17 that policy makers consider underemployment, which includes part-time workers who want full-time jobs, one of the gauges of labor-market strength.

“As we look at the unemployment rate and try to determine what it means for the labor market, we look at these other indicators as well,” Bernanke said in response to a question from Marlin Stutzman, a Republican representative from Indiana, during the Fed chairman’s semiannual testimony to Congress.

Part-Time Share

The number of part-time employees in June rose by 360,000, the Bureau of Labor Statistics reported, based on its survey of households. Full-time workers fell by 240,000, erasing much of the gains from April and May. The share of Americans who work part-time for economic reasons, meaning they can’t find full-time jobs or because their hours have been cut, is 78 percent higher than in December 2007, when the 18-month recession began.

“It’s hard to make any judgment,” Bernanke said when Stutzman asked if the Patient Protection and Affordable Care Act’s mandates are slowing the economy. Bernanke said that it has been cited in the economic outlook survey known as the Beige Book, which the Federal Open Market Committee considers in assessing the economy.

“One thing that we hear in the commentary that we get at the FOMC is that some employers are hiring part-time in order to avoid the mandate,” Bernanke said. He added that “the very high level of part-time employment has been around since the beginning of the recovery, and we don’t fully understand it.”

The health care law has been included as a job market concern by businesses surveyed in each of the Beige Books released by the Fed this year. In July’s report, for instance, the Chicago district noted that “several retailers reported that the Affordable Care Act would lead to more part-time and temporary versus full-time hiring.”

Small Portion

Studies by Federal Reserve Banks in Philadelphia and Minneapolis show only a small portion of respondents say they have changed their workforce structure because of the law.

The law requires employers with 50 or more full-time equivalent employees to provide benefits to those who work at least 30 hours a week, or pay a $2,000-per-person fine. The Obama administration said this month that it would give businesses an extra year to comply with the mandate, which was to take effect in 2014, while it aims to streamline reporting.

The high number of part-time workers is “primarily an issue of labor demand: we have a weak economy,” said Elise Gould, director of health policy research at the Economic Policy Institute in Washington, which receives about a quarter of its funding from labor unions.

Economic Reasons

The number working part-time for economic reasons in June was at its highest since October. It has decreased by 1 million from a high of 9.23 million in September 2010.

Employer uncertainty surrounding the healthcare law “is having a dampening effect” on full-time hiring, said Ken Mayland at ClearView Economics LLC in Pepper Pike, Ohio. He said he has “a strong suspicion” that it contributed to the recent increase in part-time workers.

Of about 75 manufacturers surveyed by the Philadelphia Fed, 5.6 percent said they have shifted from full-time to more part-time workers to avoid healthcare rules and 2.8 percent have refrained from hiring or fired workers, based on results released July 18. Over the next year, 8.3 percent plan to have more part-time workers and 5.6 percent plan to fire or refrain from hiring workers because of the law.

For firms near the 50-employee cutoff “we did find that they were taking actions already,” said Michael Trebing, senior economic analyst for the Philadelphia Fed. “A lot of the comments that we received, and we received a lot of them, still suggested that there was a lot of uncertainty about long-run effects.”

Larger Companies

The businesses averaged 236 employees apiece, skewing the survey toward larger companies, Trebing said. All responded after the mandate’s delay was announced.

The Obama administration has questioned the law’s effect on part-time employment, saying that 96 percent of the employers it covers already offer health insurance.

“The healthcare law will decrease costs, strengthen small businesses and make it easier for employers to provide coverage to their workers, as we saw in Massachusetts, where employer coverage increased when similar reforms were adopted,” said Joanne Peters, a Health and Human Services Department spokeswoman, in an e-mailed statement.

A March survey of 205 companies released by the Minneapolis Federal Reserve, which included a broader array of business types than the Philadelphia data, found 89 percent of businesses had no plans to shift to more part-time staff to avoid the rule.

‘No Impact’

“Because the president moved the date of the employer requirement to 2015, there should be absolutely no impact” on part-time employment in the near-term, said Gould of EPI.

Andy Puzder, chief executive officer of CKE Restaurants Inc., a Carpinteria, California-based company that runs the Hardee’s and Carl’s Jr. burger chains, takes a different view.

“While American businesses appreciate the reprieve, they still know this mandate is coming down the road, so I’m not sure it’s going to meaningfully change anyone’s behavior,” Puzder said. CKE has been hiring more part-time workers as a result of the law, though that hasn’t come at the expense of full-timers, Puzder said in an interview.

Virginia restaurateur Christopher Savvides said he has stopped hiring full-time and limited part-timers’ hours to steer clear of the law’s requirements. Savvides said he has no plans to change course at his three restaurants and an associated catering company based in Virginia Beach.

“Everyone I hire right now is going to be part-time,” he said in a phone interview. “I can’t afford health insurance for everyone.”

Income Cut

In Ohio, April Freely is among a few hundred adjunct professors poised to see their income cut after the University of Akron decided to strictly enforce limits on the number of courses part-timers teach. The college is among more than a half-dozen in Ohio that have said they’ll restrict hours at least partly due to the Affordable Care Act.

For Freely, who teaches English composition, that means losing about half the $12,000 she earned from the school last year — and still not getting health benefits, she said.

“Some people are quitting academia all together, some are picking up courses at other campuses,” Freely, 30, said by telephone. “Mostly, it’s making people really angry.”

The university is awaiting legal advice and IRS guidance before deciding how to respond to the delay, said Eileen Korey, a spokeswoman. For now, it’s maintaining its limit on part-time faculty hours, she said in an e-mail. The school would have to find an extra $4 million to offer benefits next year to 400 part-timers now over the limit, Korey said.

Main Driver

Economic weakness is the main driver elevating part-time statistics and it is hard to separate out healthcare effects, said Alec Phillips, a Goldman Sachs Group Inc. economist and analyst based in Washington. Some employers do have a healthcare-based incentive to hire part time, he said.

“We do expect to see more part-time workers and fewer full-time workers than we would otherwise have seen,” Phillips said. “There is probably a limit to how much employers can use the shift to part-time to reduce costs” even in the face of healthcare mandates, he said.

In a stronger economy, Gould said, employees would have more power and employers would have less ability to cut hours to avoid healthcare costs. “If there was more labor demand generally, then there would be a different reaction to these requirements,” she said. “Overall, we’re just still in a very weak economy.”

Brewer, the writer, agrees with that assessment. “I know a lot of people in my life who are also searching for jobs,” said the University of Missouri-Columbia graduate. “There are jobs out there, but I think it’s bleak.”

© Copyright 2014 Bloomberg News. All rights reserved.

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