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Finance: ObamaCare Could Have Negative Impact on Employment

Jan. 9, 2014
CFOs believe that full implementation of ACA could result in a reduction in employment and a shift toward part-time workers.

The Affordable Care Act (ACA), aka ObamaCare, has dominated the headlines lately mostly because of technical problems with the website, which has made it difficult if not impossible for many people to sign up for medical insurance. Those computer glitches could be the least of the problem, though, according to recent surveys of chief financial officers. These CFOs believe that full implementation of ACA could result in a reduction in employment and a shift toward part-time workers.

Twenty percent of respondents to the Duke University CFO Global Business Outlook survey say they will hire fewer employees than otherwise due to costs associated with ACA, and an additional 11% indicate they may end up laying off workers because of the legislation. Also, 41% say their companies will consider either reducing some employees to fewer than 30 hours per week or hiring new employees that work fewer than 30 hours.

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"I doubt the advocates of this legislation would have foretold the negative impact on employment," says Campbell Harvey, a professor of finance at Duke's Fuqua School of Business. "The impact on the real economy is startling. Nearly one-third of firms may either terminate employees or hire fewer people in the future as a direct result of ACA."

In a separate survey of CFOs conducted by Bank of America Merrill Lynch, 53% of respondents say they expect their companies' labor costs will increase as they comply with ACA, and 77% say their companies will be offsetting those costs by increasing employee contributions to their medical insurance. (Roughly 40% of respondents are in manufacturing industries.) Concerns about rising health-care costs rank as having the biggest potential negative impact on the U.S. economy, according to the survey.

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In a more positive vein, more than half (54%) expect their companies to have higher sales in 2014 than 2013, while only 8% expect sales to decline. The rest anticipate 2014 being relatively flat.

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