Wednesday June 5th, 2013 • Posted by Craig Eyermann at 6:33am PDT •
Say what you will, governments do one thing really well: create perverse incentives!
Today’s example is provided by the Patient Protection and Affordable Care Act (a.k.a. “Obamacare”), which sets up a really perverse incentive for the employers of part time workers: it sends the cost of having an employee work their 30th hour in a week skyrocketing. Jed Graham of Investors Business Daily shows how much in the chart below:
For a worker making $16 an hour for 29 hours per week, the 30th hour of work each week could cost an employer $112.15.
In other words, ObamaCare could cost an employer as much as $96.15 extra an hour — or six times the going hourly wage in this example.
Here’s how: Employers who offer health coverage that is deemed either too pricey or too skimpy will owe $3,000 for each full-time, 30-hour-per-week, worker who taps ObamaCare subsidies.
Because the $3,000 fine is nondeductible, it’s equal to $5,000 in deductible wages for a profit-making firm facing a 40% combined federal and state tax rate.
Simply dividing that $5,000 by 52 weeks yields an ObamaCare cost of $96.15 per hour.
Graham goes on to note that the higher costs for working number of hours more than 29 but less than the 35 hours per week that marks the minimum to be considered to be a full-time worker will likely drive those kinds of part-time work weeks out of existence. Right along with the extra income that part time workers putting in those kinds of hours could have earned – which will make them double-losers.
So in its essence, Obamacare provides a powerful incentive for employers to divide Americans into a two-tiered, have and have-not workforce.
The more we learn about Obamacare, the less there is to like about it