John C. Goodman

As noted, employers are already reacting to ObamaCare. In fact, there was a huge shift to part-time employment in the fast food industry beginning in January. The reason: ObamaCare will employ a 12 month "look back." In deciding whether a worker is full-time or part-time next January (when the mandate becomes effective) the government will look at the average weekly hours worked in the previous year.

I believe this change is economy wide. As Catherine Rampel noted at The New York Times economics blog the other day: Compared with December 2007, when the recession officially began, there are 5.8 million fewer Americans working full time. In that same period, there has been an increase of 2.8 million working part time.

One fast food restaurant owner I talked with (owning 100 franchises) told me that the average work week for their employees has been reduced to 25 hours this year — compared to 38 hours last year.

Employees may be able to work part-time at two different restaurants — both of which avoid the mandate by switching to part-time labor. On the other hand, they may just choose to work fewer hours. The reason: When the effects of the tax law are added to the effects of ObamaCare, a moderate income family will face a 41 percent marginal tax rate.

As a Wall Street Journal editorial calculated the other day, letting part-time workers work more hours can be expensive. If a 29 hour-a-week employee works one more hour for 50 weeks that will trigger a $2,000 fine. Dividing the fine by the additional hours of work, that works out to a $40 an hour penalty.

Bottom line: employment opportunities are being curtailed by the imposition of ObamaCare. Things will be even worse if a 24 percent increase in the cash minimum wage is heaped on top of it.

Economists have traditionally believed that an increase in the minimum wage (as well as mandated benefits) causes unemployment. However, a study by David Card and Alan Krueger found very little employment effect in the fast food industry in Pennsylvania and New Jersey.

You wonder if economists ever talk to employers when they do these studies, however. Because of labor law and tax law, employment in the fast food industry has already been pared to the bone. When I was young, every restaurant had waiters and waitresses who brought food to your table. But this service has been priced out of the market in fast food by past increases in the minimum wage. Fast food restaurants are getting by with the absolute minimum amount of labor they need to supply their products.

If government imposes higher labor costs on this industry, the restaurants will try to make it up by raising their prices. However, if the customers won't pay the higher price — as may be the case in poorer neighborhoods — the restaurant will have to close.

Moreover, in order for prices to rise in one market there must be a corresponding decline in other markets. For the economy as a whole, employers can't raise prices on the average with no change in the money supply.


John C. Goodman

John C. Goodman is Senior Fellow at The Independent Institute and author of the widely acclaimed book, Priceless: Curing the Healthcare Crisis. The Wall Street Journal and National Journal, among other media, have called him the "Father of Health Savings Accounts."