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Healthcare Reform Will Have Unintended Consequences for the US Economy in 2014

An unintended consequence of the healthcare reform impacts part-time workers and plays into our 2014 recessionary outlook for the American economy.

Many great ideas, and not-so-great ideas, are undertaken without regard to the always-present Law of Unintended Consequences. While they are unintended consequences, they are nevertheless very real and often painful.

Healthcare reform presents an example of this law. We will not discuss the benefits or drawbacks of the reform in general, and we will not label it good or bad. It is the law of the land now, and we can begin to look at what the impact may be. It would appear that one of the unintended consequences is that part-time employees will be making less money in the future. 

Consider the quick serve food industry. McDonald’s, Burger King, Arby’s, and the like all employ a legion of part-time employees. They often work up to 30 hours a week, which currently keeps them from being considered full-time employees. The healthcare law changes the threshold to 30 hours. Anyone working 30 hours or more must be eligible for an exchange plan if one is not provided through the employer. The employer must contribute $2,000 toward the exchange for these employees should they opt into the exchange. 

The fast-food industry has no intention of doing this. Instead, they will reduce the number of hours these folks work to about 25. The reduction of five hours a week is meaningful to these folks as they save for college or work to make ends meet. The employers will have to hire more people, train them, schedule them, and manage them, all of which leads to decreased efficiency. None of this leads to more people insured.

Reduced earnings, reduced efficiency and thus profits, and no real help for those involved. As for the economy, the impact is potentially one more “paper cut” contributing toward the downturn we see coming in 2014. The Law of Unintended Consequences is not often favorable, and this is certainly not an exception to the general rule.  

Discuss this Blog Entry 1

on Mar 11, 2014

Once again when the government says we're here to help you....look out... No wonder Obama want to raise the minimum wage...100's of thousands of workers are having their hours cut from 30 to 25 - government answer -- force an increase to their wages so they don't notice who caused them to get decreased hours...

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Brian Beaulieu

Brian Beaulieu has been an economist with ITR Economics since 1982 and its CEO since 1987. He is also Chief Economist for Vistage International and TEC, global organizations comprised of over 13,000...

Alan Beaulieu

One of the country’s most informed economists, Alan Beaulieu is a principal of the ITR Economics where he serves as President. ITR predicts future economic trends with 94.7% accuracy rate and...
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