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Obamacare Meets Reality. Reality Wins.
Another Adventure In Cargo Cult Economics
For years the Democrat party has derided the GOP’s view of economics. Our view, essentially, is that your money is yours, not the government’s, and the decisions you make on how to spend it will inevitably be more lucid than anything the government comes up with. The corollary to this is that income redistribution is nothing more or less than theft which characterizes garden variety covetousness as fairness. They call this “trickle down” economics.
The Democrats have their own operating principle: Cargo cult economics. It has many facets but the basis idea is that if the government creates something that is associated with a vibrant middle class then a vibrant middle class will spring from that program as inevitably as Athena sprang from the forehead of Zeus.
Though the term has been around for a while, I first encountered it while riding with a good friend through a dystopic steel town outside Pittsburgh where right in the middle of boarded up store fronts some governmental agency had plopped down an “arts center.” The idea being that somehow funding an arts center in a mostly deserted downtown would revive the downtown area because affluent downtowns all have arts centers.
Over the past months, we’ve chronicled the Obama regime’s slavish devotion to cargo cult economics (here | here | here | here | here | here). Now the slow motion implementation of Obamacare is giving us a rich laboratory for observing cargo cult economics in full flower.
What Obamacare has done is create a series of perverse incentives that encourage businesses to stop providing health insurance. As a business you have the choice of providing a rather gaudy health care plan to your employees or paying a tax. I say gaudy because the the basic requirements of the package, providing enough birth control pills to satisfy Sandra Fluke’s appetites, for instance, adds cost on to the plan. Contrary to what a lot of people seem to believe the health care plan provided by your employer is not YOUR health plan, it is your employer’s.
So by paying a tax, a business can avoid the human resources head ache of managing a health plan and reduce costs. What option do you think many businesses will choose.
But wait there is more.
An employer only has to provide a health plan for full time employees. There is no penalty for not providing health coverage to part-time workers. And there are no penalties if you employ fewer than 50 persons (by person I mean full-time equivalents: if you have part time workers and your average number of hours worked exceed 50 x 120 (4 weeks x 30hr/week). You can read more on the nuances of calculating what is a full time equivalent worker courtesy of RedState member jayp.
Faced with the prospect of paying as much as $40,000/year some employers are reducing both full time positions and total number of employees.
Companies as diverse as Papa John’s, St Jude’s Hospital, and Murray Energy have all announced layoffs that are linked to Obamacare.
What Obamacare has done in the name of providing universal health care is to make it advantageous to employers to provide no health care whatsoever. This isn’t necessarily bad, in my view one of the major shortfalls of our current system is that the policy is owned by the employer rather than the employee, but what is bad is when such a sea change occurs when the actual operational concept was to expand the scope of coverage provided by employers.
By gold plating the minimum policy, employers are encouraged to carry no policy at all. To avoid the fines associated with not providing coverage employers have an incentive to reduce a vast majority of employees to working less than 30 hours per week. If you are a waiter, your employer now has an incentive to reduce your tip income to avoid health care costs:
Bob McAdam, Spokesperson for Darden, parent company of Olive Garden and Red Lobster restaurants, stated that they were still in a test stage back in October. The company had made plans to reduce hours and require tip-sharing from waitstaff to the remainder of employees, which would eliminate the owners from having to provide tip-credit*. (*A set hourly pay amount for waitstaff established by the local government and is divided into two parts. If the waiter doesn’t earn tips then they receive the whole amount of both parts. If the waiter does receive tips then they only receive half of the hourly amount.)
On the subject of employers wanting to reduce the incomes of waitstaff for his own benefit, it certainly isn’t going to encourage staff members to purchase food at his restaurant.
One issue that concerns career waiters is that they choose the field because they can earn up to $200 per day in tips, having to share their income with remaining employees reduces their own income.
When is a waiter responsible for paying for the wages of his co-workers? For that matter why is the paying consumer responsible for paying for the wages of a business above and beyond the price of his meal? The tip has always been a gratuity, a thank you, an appreciation, not meant as a subsidy for business owners to underpay their employees.
Since the government assumes that the waiter is earning at least 8 percent in tips figured on his gross sales for the day; reporting less could trigger audits.
In the view of Obama and his minions companies are in business to provide free stuff to their employees (so his view on economics parallels his view on governance) and since a vibrant middle class has health care provided by their employer if the government merely mandated this to happen we would suddenly be prosperous.
Now the demographic Obamacare sought to help is finding itself not only without health coverage, it is also required to work two jobs to make ends meet. Well played, President Obama.