Wendy's and Taco Bell Franchisees Talking About Cutting Hours To Avoid ObamaCare Fines

A blog about business and economics.
Jan. 8 2013 12:37 PM

Wendy's and Taco Bell Franchisees Talking About Cutting Hours To Avoid ObamaCare Fines

One of the least-wise provisions of the Affordable Care Act is a plan to fine firms with over 50 employees that don't provide health insurance to their workers to the tune of $2,000 per full-time worker. The natural response for many firms is to do exactly what Ned Resnikoff reports some Wendy's and Taco Bell franchisees are doing and cut workers' hours to below the 30 hours per week threshold, thus avoiding the fine.

Now in the very short term this operates as a kind of de facto job-sharing program similar to what Germany did during the downturn. The German model was to offer a government subsidy to encourage job sharing, whereas the Obamacare model levies a financial penalty to induce it.

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But we should worry about the longer-term impact here. The origin of this policy, as I understand it, is in concerns expressed by firms that already do provide employer-subsidized insurance to their workers and compete with firms that don't do so. Right now offering benefits is costly, but you can say to current and potential employees that the provision of health benefits is a reason to come work at the benefit-providing firm. But now along will come Obamacare and offer subsidized coverage to the workers at companies that don't provide benefits, costing benefit-providing firms an advantage in the labor market.

I'd be pissed if I were in that situation, too. But I don't really think there's a public policy problem there. Absent the fine you'd merely see an accelerated transition away from employer-linked coverage and toward a world where everyone gets their own insurance policy from a subsidized regulated exchange. That would be a good outcome, not a bad one, while forced hours cuts is going to lead to some real hardship for people.

Matthew Yglesias is the executive editor of Vox and author of The Rent Is Too Damn High.

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