Redefining “Full-Time Employees” in Obamacare

One of the most destructive elements of Obamacare extends beyond healthcare into the labor market.

The 30-hour full-time employee definition fundamentally alters more than 40 years of federal policy that considered “full-time” to be a 40-hour work week. Vulnerable populations such as those individuals who work between 30 and 36 hours a week will be in danger of having their hours cut.

Despite the fact that 160 million individuals receive employer-sponsored insurance, Obamacare mandates that employers who have more than 50 full-time employees provide healthcare.  Those that do not provide insurance or who do not provide “adequate” insurance as defined by the Administration are subject to a tax penalty.

Why is the Change in Definition Problematic?

  • The change in the definition disproportionately hurts low wage earners who work service industries.  Specifically, the definition incentivizes companies to switch large numbers of their workers from full-time to part-time employment.[1]  In 2012, 75.3 million working-age Americans were paid at hourly rates, representing 59 percent of all wage and salary workers.[2]  Among them, one-fifth is under the age of 25 (half of whom are paid minimum wage or less), and 47 percent have a high school diploma or less.[3]  With the unemployment rate among adults without a high school education at 11 percent[4] and at 21.4 percent for teens in the workforce, the Obamacare definition of work hours is likely to impact these segments of the population the most.[5]
  • There are already 7.2 million Americans working part-time for economic reasons, 2.6 million more than when the recession began in August, 2007.[6]  This number will likely grow significantly, leaving more workers with less available income necessary to spur economic growth.  The rule creates administrative complexities for businesses and impacts their incentive to hire and retain workers, resulting in less business expansion and more part-time employees.
  • Testimony presented by the Hoover Institution to the House Committee on Ways and Means estimates that the 30-hour rule puts 2.6 million working-age Americans with a median income under $14,333 for individuals and $30,000 for families at risk of losing jobs and hours.[7]  89 percent of those affected do not have a college degree, and 60 percent of the affected population is between the ages of 19 and 34.[8]  63 percent of those most at risk of lost hours are women, of which half have a high school diploma or less.[9]
  • Employers and workers in the service sector will be affected most by these changes.  Of the 2.6 million workers at risk of reduced hours, over 600,000 work in the retail trade, and 589,000 work in restaurants.[10]  These workers are likely to be impacted significantly as businesses try to comply with the mandate.  A 2012 study from Mercer Consulting found that 67 percent of retail and wholesale employers who do not provide insurance to all employees were “more inclined to change their workforce strategy so that fewer employees meet [the] threshold” set out by the employer mandate.[11]
  • The employer mandate will also affect the education industry significantly.    According to the same Hoover Institution analysis, 225,000 workers in the education industry (approximately 2 percent of all workers in that field) are at risk of seeing their hours cut because of the 30-hour rule.[12]  Already, over 100 school districts across the country have cut hours or outsourced jobs to avoid the mandate.[13]
  • These changes will reduce the number of total hours worked, on net, by 1.5 to 2.0 percent during the period 2017-2024, according to the CBO.[14]  CBO cites that workers will choose to work less as a result Obamacare and the phasing out of subsidies, resulting in a one percent reduction in aggregate labor compensation over the 2017-2024 period.[15]  As a result, the workforce will shrink by the equivalent of 2.0 million full-time workers in 2017 and 2.5 million in 2024.[16]

[2] Bureau of Labor Statistics, Characteristics of Minimum Wage Workers: 2012 (Feb. 26, 2013), p. 2.

[3] Id. at 8.


[6]; see also: BLS Historicals, Employment Level – Part-Time for Economic Reasons, All Industries (Series ID: LNS12032194) 

[7] Lanhee J. Chen, Ph.D., Testimony Before the Committee on Ways and Means, US House of Representatives (Jan. 28, 2014), p. 4.

[8] Id. at 4.

[9] Id. at 4.

[10] Id. at 5.

[12] Lanhee J. Chen, Ph.D., Testimony Before the Committee on Ways and Means, US House of Representatives (Jan. 28, 2014), p. 7.

[13] Jed Graham, ”100 School Distrcits Cut Work Hours, Blame Obamacare,“ Investor’s Business Daily (Oct. 18, 2013).

[15] Id. at 117.

[16] Id. at 117.