The Gig Economy: Is Obamacare to Blame?

Hillary is attacking the sharing economy, despite Obamacare possibly contributing to it, in a speech:

Meanwhile, many Americans are making extra money renting out a small room, designing websites, selling products they design themselves at home, or even driving their own car. This on-demand, or so-called gig economy is creating exciting economies and unleashing innovation.

But it is also raising hard questions about work-place protections and what a good job will look like in the future.

In her defense, during the 2008 primaries Hillary was right about Obama’s inability to appeal to white voters, his weakness on terror, as well as his deference to Islam and America’s enemies, but her concerns about Uber and the gig economy are possibly misplaced. I agree that the sharing/gig economy creates innovation and economic growth, filling a market demand for cheap on-demand labor. But when the left whines about gig jobs, they shoulder some of the blame. Due to the Obamacare employer mandate, which after a series of delays finally takes effect in 2016, businesses are more reluctant to hire for fear having to pay employee insurance if they have over fifty employees.

From Forbes: How Obamacare’s Employer Mandate Harms Low-Wage Workers

The Affordable Care Act may explain why weekly hours worked for low-wage employees has fallen

Comparing the percent change of average weekly hours since the recession began in December 2007, Graham found that industries with an average pay up to about $14.50 stagnantly gained a minimum number of hours from 2010 to 2012 and then sharply lost hours from 2012 through 2013. There was a net decrease of about 2.5% in hours worked between December 2007 through 2013. In contrast, work hours in higher-wage industries grew since 2009, so that by 2013, they averaged more hours than the December 2007 benchmark.

This is evident by the chart below:

According to numerous surveys, businesses have shifted full-time employees to part-time in response to the ACA, in addition to reducing the number of employees or raising prices charged to consumers:

…2013 second-quarter report, the firms were asked what steps, if any, that they had already taken or would take in response to ACA requirements. Of the surveyed firms, 11.6% had shifted full-time workers to part-time and 16.3% planned to switch full-time workers to part-time in the near future. Likewise, from a report released by the Federal Reserve of New York that published the findings from two surveys, the Empire State Manufacturing Survey found that 19.3% of the surveyed firms had increased or would increase the proportion of part-time employees, 21.6% had reduced or would reduce the number of employees, and 36.4% had increased or would increase the prices charged to consumers; in the Business Leaders Survey, 20.2% of the surveyed firms had increased or would increase the proportion of part-time employees, 16.9% had reduced or would reduce the number of employees, and 25% had increased or would increase the prices charged to consumers.

Other factors for the rise of the gig economy include the inexorable trend towards more efficiency and productivity. These are forces beyond anyone’s control. Until recently, you had a job glut of too many people being overpaid, and the 2008 financial problem changed that, putting much more emphasis on productivity, profits and efficiency, which is great for stock prices but not so great, I suppose, for lower-skill workers. The 2008 financial problem gave employers a good excuse to reduce hiring long after the economy recovered, and then Obamacare further accelerated this trend.

Comments are closed.