President Obama’s health care reform is prompting employers to hire more part-time and temporary workers to escape paying benefits under a mandate that goes into effect next year, amplifying a trend toward transient employment that took hold during the recession, according to a growing number of economic indicators.
Hardest hit by the move toward cutting work hours and increasing temporary hiring are lower-income workers, millions of whom already lack health insurance and are afflicted with constant turnover in jobs at fast-food restaurants, big-box retailers and other businesses with large numbers of low-paid staff.
Wal-Mart, the nation’s largest employer, is leading the trend, having increased the share of its temporary staff to 10 percent this year from between 1 percent and 2 percent last year, according to a Reuters survey of 52 Wal-Mart stores last month. It found that half of the stores were hiring only temporary workers — something Wal-Mart previously did only during the Christmas shopping season.
Wal-Mart Stores Inc. CEO Bill Simon conceded that the company is hiring more “flex-time” workers to hold down costs, though the company denied that it was trying to escape benefit payments under the 2010 Affordable Care Act, often dubbed “Obamacare.” But business analysts say most of the temporary workers at Wal-Mart are unlikely to ever get insurance through the company because it could take up to a year to become eligible and the workforce has a high turnover rate.
Monthly reports from the Labor Department show a rising trend of temporary hiring and still-elevated levels of part-time workers, though the recession officially ended four years ago this month. Economists say the looming Jan. 1 deadline for providing health insurance to all full-time workers may be the reason why. The mandate applies to companies employing more than 50 people who work 30 or more hours per week.
“The increased use of temp workers may lead to more permanent hiring, but there is also the possibility that employers are taking on more temp workers to keep payrolls under the threshold of 50 workers and thus to remain free from the requirements of the Affordable Care Act,” said Sophia Koropeckyj, managing director at Moody’s Analytics.
COVERAGE: Health Care Reform
Temporary jobs have grown far faster than the overall job market, with the total temporary workforce reaching pre-recession levels of more than 26 million this year and surging noticeably in recent months. Meanwhile, the number of people working part time because they couldn’t find full-time jobs remains elevated at 7.9 million, nearly twice pre-recession levels.
Low-income workers hit hard
Ball State University economist Michael Hicks said the trend to reduce hours is hurting the same uneducated and unskilled workers who suffered the most during the recession and have been getting an ever-smaller piece of the income and benefits pie for decades. More educated, higher-income workers already have health care benefits from their employers, by and large, and the law is not expected to have as much effect on them, he said.
“The incentives shift to hire higher-income workers full time and low-income workers part time” because health care costs are largely the same per person but constitute a much smaller share of compensation costs with workers earning higher wages, he said. “Employment opportunities for college graduates will continue to expand, but the share of part-time employment will also grow” among the most hard-pressed workers with less education, he said.
“Right now there’s a great deal of anecdotal evidence the ACA is promoting a shift from full- to part-time employment,” he said. “At some point in the coming months, we’ll have more certainty from the data” as employers who are cutting work hours to escape the mandate will do so in a mass rush before the Jan. 1 deadline, he said.
The Ball State economist has been tracking the share of workers who have part-time jobs, and it has stayed at the same high level of one for every 15 full-time workers since the recession — up from one per 26.4 full-time workers before the recession began in December 2007.
Many workers take part-time jobs only because nothing else is available and may have to find two or more part-time jobs to bring in the income of the one full-time job they seek, he said.
More than a quarter of part-time workers are holding down two or more jobs to make ends meet. Many of those workers bide their time in those temporary positions for months or years, hoping that a full-time position will open up. But those workers are likely to be increasingly disappointed, Mr. Hicks said.
“We are turning into a nation of part-time workers in search of full-time jobs,” he said.
Wave of the future?
Crown Financial Ministries CEO Chuck Bentley argues that less than full-time work is the wave of the future for America. “Given the pressures of Obamacare, many will be forced to combine part-time jobs for a full-time salary,” he said.
Although the trend is just starting to emerge in the government’s official employment statistics, and businesses are loath to acknowledge that they may be avoiding full-time hires because of the law, many people who hire regularly or work in human resources jobs say the trend is unmistakable.
The pressures are cutting the hours even of those who already work part time. Officials in Floyd County, Ind., announced last week plans to pare back the hours of part-time county workers who now work 34 hours a week to get them under the 30-hour-a-week Obamacare mandate. The Southern Lehigh School District in Pennsylvania voted to cut the hours of 51 part-time secretaries, custodians and cafeteria workers to avoid the health care mandate.
“We are always looking to meet our obligations to students, the community, taxpayers, our employees and our staff, and this vote will have a direct impact on some of our employees,” South Lehigh School Board President Jeffrey Dimmig told the Lehigh Valley Morning Call, saying he was “troubled” by having to make the move.
Staffing firms that supply temporary and contingent workers are reporting brisk business this year, with temporary jobs increasing significantly faster than full-time jobs. The American Staffing Association reports a 7.6 percent jump in temporary workers in the past year, while Freelancer.com, the world’s largest outsourcing marketplace, reported triple-digit growth and a doubling of revenue in the past year.
A Sage North America survey of small businesses, which do the most hiring in the U.S., found that 82 percent intend to hire full-time staff this year, while nearly 60 percent also are hiring part-time, seasonal, contract and temporary workers.
“Flexible staffing solutions are an important tool” in an environment of moderate economic growth and growing regulatory burdens, said Richard Wahlquist, president of the staffing association. “American businesses continue to be very strategic about when and how to increase the size of their workforces.”