Economics, U.S. Economy

Poll: 41% of small businesses are holding off on hiring because of Obamacare

Image Credit: Shutterstock

Image Credit: Shutterstock

Gallup surveyed 603 small-business owners last month. The topic was Obamacare. The results are in.

Forty-eight percent think that Obamacare will be “bad for your business.”  Nine percent think it will be good for their business; 39 percent think it will have no impact. Fifty-five percent think Obamacare will raise the amount of money their business pays for healthcare. Thirty-seven percent think it will have no impact; 5 percent think it will lower the amount of money their business spends on healthcare.

These questions are about perception, and present useful and interesting information.  But the headline comes from a question not about perception, but about action.

I quote from Gallup’s report: “When asked if they had taken any of five specific actions in response to [Obamacare], 41% of small-business owners say they have held off on hiring new employees and 38% have pulled back on plans to grow their business. One in five (19%) have reduced their number of employees and essentially the same number (18%) have cut employee hours in response to the healthcare law. One in four owners (24%) have thought about eliminating healthcare coverage for their employees” (emphasis mine).

Starting in 2014, Obamacare requires firms with an average of fifty or more full-time workers in the previous calendar year – 2013; this year – to provide health insurance to their employees or face penalties.  This creates what economists (and non-economists) describe as an incentive not to hire a fiftieth worker.  It may even provide an incentive for firms to let a few workers go if doing so would get them under fifty workers. These poll results suggest that both are happening.

All the usual caveats apply: it’s just one poll; we’re not even halfway through 2013, so it’s hard to find solid evidence of Obamacare’s effect on the labor market.  But it must be said that these poll results are troubling.  And there are some early signs in the data that the poll results are accurately reflecting the behavior of firms.

You wouldn’t know it from paying attention to Washington, but we have a badly damaged labor market.  The pace of recovery has not quickened over the last year or so.  Employment is not returning to its pre-crisis level – the share of the working-age population employed has been flat since the “recovery” began.  We still have 2.6 million fewer jobs than when the Great Recession started.  Our 4.4 million long-term unemployed workers are a national crisis.

So given all this, let me throw something out there: During a labor market crisis, perhaps the government shouldn’t provide a disincentive for small businesses to grow their workforces.

Michael R. Strain is a research fellow at the American Enterprise Institute. Follow him on Twitter at https://twitter.com/michaelrstrain.

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