The Part-Time Tweak

As a rule, I think it is a mistake to think you can repair the perverse incentives in the ObamaCare with minor tweaks. Two senators, Joe Donnelly, Democrat of Indiana, and Susan Collins, Republican of Maine, are proposing to tweak the Affordable Care Act by changing the definition of part-time work to include any work schedule of 39 hours a week or less. The employer mandate would apply only to those who work 40 hours or more.

But as Casey Mulligan explains, that doesn’t eliminate perverse incentives; it just shifts them:

By taking a 39-hour position, the employee can have comprehensive health insurance coverage and actually make more money than he would in a full-time position. In effect, the new subsidies totaling almost $8,973 more than fully offset, from the point of view of employers and their employees, the loss of production that occurs from working 39 hours a week rather than 40.

It’s one thing for public policies to present workers with a small reward for working full time. But the proposal from the two senators would put millions of people in the position of having to pay ― in the form of less disposable income ― for the privilege of working full time. When millions of workers choose part-time rather than full-time work under the Donnelly-Collins proposal, it will be taxpayers who pick up the tab.

The Affordable Care Act is full of disincentives. But tweaking the law without carefully considering incentives is likely to increase the law’s damage to the labor market and its depletion of taxpayer funds.

Read the full article and see the table.

Comments (13)

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  1. August says:

    One of the most interesting parts is how full-time and 20 hour part-time are about the same for the employee under his calculations

  2. JD says:

    So there is an incentive to being employed part-time. Since usually full-time jobs carry greater responsibility and require more skill, some people that are more better suited for full-time positions will opt for part-time where they are a worse fit.

    • Dewaine says:

      Although employers would also be incentivized to make those jobs part-time, meaning the “fit” is fine. They’ll just end up having to hire more people that work less hours each

    • Dewaine says:

      It may actually help. More people doing the same amount of work means less unemployment and more time per person spent on family and leisure. This could alleviate many social problems as well as health problems.

      • Sam says:

        Maybe this will contribute to a happier culture/society…after all, we need happier, healthier people. I think happiness and more time has some correlation to health. Fast food is oftentimes a product of a lack of time for prepare foods at home.

        • JD says:

          I agree with you both, I think we need more flexibility so that people who want to work more can be rewarded and those who want to work less can. The way federal benefits are tied to the 40 hour work week undermines this.

      • JD says:

        Efficiency would definitely take a hit. Even assuming that we could simply add more workers from the unemployed to replace the lost labor, each person requires significant investment,(e.g. education) if we aren’t using them efficiently we have wasted a lot of resources. We would be expending more resources to produce the same output. That creates ripples throughout the economy, standard of living would certainly decrease.

      • JD says:

        There is an optimal level of productivity for each person, we shouldn’t mandate any uniform standards, they always end up hurting someone.

  3. Sam says:

    My incentive for working part-time is a little different in nature…

  4. Buster says:

    This just reinforces the notion that politicians believe they are immune from the effects of their actions — and the laws of economics. If “part-time” becomes any person working less than 40 hours, every hourly employee who works 40 hours would suddenly be shifted to 39. Most people want to work full time (i.e. 40 hours) but would welcome 39 hours if they received higher pay, say, $2 per hour more) and a generous subsidy to buy health insurance in the exchange.

  5. Studebaker says:

    This type of reasoning is almost as stupid as the French politicians, who thought that mandating a 35-hour work week would encourage firms to hire more people to take up the slack.