Health Reform Not Causing Significant Shift to Part-Time Work

But Raising Threshold to 40 Hours a Week Would Make a Sizeable Shift Likely

By Paul N. Van de Water

Updated January 6, 2015 - Center on Budget and Policy Priorities

Congressional leaders have tentatively scheduled a House vote early in January on a measure to raise the threshold for health reform’s employer mandate from 30 to 40 hours.[1]  The health reform law requires employers with at least 50 full-time-equivalent workers to offer health coverage to employees who work 30 or more hours a week or pay a penalty.[2]

House Speaker John Boehner and Senate Majority Leader Mitch McConnell call the 30-hour threshold “an arbitrary and destructive government barrier to more hours” of work and propose raising it to 40 hours.[3]  In reality, however, that step would lead to fewer hours of work for employees and more part-time work — the exact opposite of what their rhetoric about “restoring” the 40-hour work week implies.

Recent data provide scant evidence that health reform is causing a significant shift toward part-time work, contrary to the claims of critics.  The number of part-time workers who would rather be working full time is shrinking.  And there’s every reason to believe that health reform will have only a small effect on the part-time share of total employment. 

More important, raising the law’s threshold from 30 hours a week to 40 hours would make a shift toward part-time employment much more likely — not less so.  That’s because only a small share of workers today — 7 percent — work 30 to 34 hours a week and thus are most at risk of having their hours cut below health reform’s threshold.  In comparison, 44 percent of employees work 40 hours a week, and another several percent work 41 to 44 hours a week.  Thus, raising the threshold to 40 hours would place many more workers at risk of having their hours reduced.  In short, it’s the present legislation, not health reform, that threatens the traditional 40-hour work week the legislation’s sponsors say they want to protect.

Data Don’t Support Claim of Big Shift to Part-Time Work

The share of part-time jobs rose sharply during the recent recession, as it does in every recession;  employers cut workers’ hours when demand for the firm’s products or services weakens.  Did this share continue to grow as we approached the start of the Affordable Care Act’s (ACA’s) employer mandate in 2015?  The answer is no.  

Part-time workers represent 18 percent of total employment — below the post-recession peak of 20 percent.  Since President Obama signed health reform into law in March 2010, all of the overall increase in civilian employment has been among people who usually work full time.[4]  These data are consistent with a recent Urban Institute analysis that found little evidence that health reform has increased part-time work.[5]

The share of involuntary part-timers — workers who’d rather have full-time jobs but can’t find them — tells a similar story.  If health reform’s employer mandate were distorting hiring practices in the way critics claim, we’d expect the share of involuntary part-timers to be growing.  Instead, as Figure 1 shows, it is down about two percentage points from its peak.

To be sure, some employers have announced they are cutting certain employees’ hours to avoid the requirement to provide health coverage to full-time workers, but they are the exception.  And while it’s too early to know exactly how much health reform will ultimately affect the amount of part-time work, there’s every reason to expect the impact to be small as a share of total employment.

In particular, there simply aren’t as many potentially affected workers as the critics expect:  only about 7 percent of employees work 30 to 34 hours a week (and thus would be easiest for employers to shift below 30 hours).  Moreover, less than one-half of 1 percent of employees work 30 to 34 hours a week and are employed by businesses affected by the employer mandate and do not have insurance.[6]  And only some of these workers would likely be at risk of having their hours cut.

“Recent research suggests that the ultimate increase in the incidence of part-time work when the ACA provisions are fully implemented is likely to be small, on the order of a 1 to 2 percentage point increase or less,” according to economists at the San Francisco Federal Reserve.  They note that this conclusion “is consistent with the example of Hawaii, where part-time work increased only slightly in the two decades following enforcement of the state’s employer health-care mandate.”[7] 

In addition, low-wage workers who work less than 30 hours a week are eligible for subsidies to purchase health insurance in health reform’s insurance exchanges (also known as marketplaces).  For many of these workers, the value of this health insurance subsidy would more than make up for a loss in earnings from working slightly fewer hours.

Raising Threshold to 40 Hours Would Make Shift to Part-Time Work More Likely, Not Less

Raising the cutoff for the employer mandate from 30 hours a week to 40 hours would make a shift toward part-time employment more likely — not less so.  Since 40 hours is the typical work week, employers could easily cut back large numbers of employees from 40 to 39 hours so they wouldn’t have to offer them health coverage.  The result would be less employer-sponsored health coverage — and thus higher federal spending for Medicaid and premium tax credits.  In addition, the penalties collected from employers who fail to meet the requirement to offer coverage would fall.  Raising the threshold to 40 hours would increase budget deficits by $46 billion over 2015-2024, according to the Congressional Budget Office.[8]

As Figure 2 shows, only about 7 percent of employees work 30 to 34 hours a week (that is, at or modestly above the health reform’s 30-hour threshold), but 44 percent of employees work 40 hours a week and would be vulnerable to cuts in their hours if the threshold rose to 40 hours.[9]

If you exclude workers at firms that already offer health insurance and thus won’t be tempted to cut workers’ hours, more than twice as many workers would face a high risk of reduced hours under a 40-hour threshold than under the current 30-hour threshold, according to New York University economist Sherry Glied and a colleague.[10]

Health reform’s employer mandate may well have some effect on hours worked, although that hasn’t yet shown up in the data.  But since few workers who lack health coverage are near the 30-hour cutoff, any such effect is likely to be small:  the employer mandate is very unlikely to prompt much of a shift toward part-time work.  Raising the cutoff to 40 hours, however, could turn the misleading claims of health reform critics into harsh reality.