Well, at least one industry is thriving under Obamacare: companies that provide temporary services.
There has been a lot of discussion about the “29ers.” Those are workers who would like a full-time job but are required to work under 30 hours a week so as not to trigger Obamacare’s employer mandate, which mandates employers with 50 or more employees to provide health coverage for their full-time (i.e., 30 hours a week or more) workers. Although President Obama decided he had the authority to ignore his law and postpone the employer mandate until 2015, many companies have been positioning themselves for the change.
And while the “part-timing of America” is a problem, the bigger issue is the number of people being pushed into, or stuck in, temporary work, often managed by temp agencies.
Simply put, the country’s temp workforce is at an all-time high; and every indication is that trend will continue, at least for the next two years (if you know what I mean).
The first graph is from the St. Louis Federal Reserve Bank’s Economic Data (FRED) website. It shows part-time employees. As you can see, the number of part-timers jumped during the 2007-2009 recession, but has mostly leveled off since.
By contrast, the second FRED graph depicts people (professional and business services) working for temporary help services. That number dropped significantly during the recession, but has exploded since then—to its highest point ever, nearly 3 million people. And this number likely excludes many “employment consultants” that specialize in finding high-level professional contract workers who may maintain that relationship (say, with the Defense Department) for long periods of time.
While liberals and unions decry the trend towards hiring temporary workers instead of full-time employees—complaining that temp workers get lower pay, few or no benefits, and often face more dangerous working conditions—it’s their policies that are driving that trend.
Take Obamacare, which liberals and unions so strongly supported. If an employer with 50 or more employees hires a full-time worker, the law mandates the employer provide health insurance. That coverage could easily cost the employer $3,000 to $4,000 a year. Since people who fill temp jobs are often on the low end of the pay scale, $4,000 represents a significant increase in the employers’ costs—e.g., 20 percent for a $20,000 per-year worker.
If employers bring in someone from a temp service instead, they save that health coverage money. And while temp workers may typically make less than full-time workers doing the same job, as unions assert, the employer isn’t necessarily realizing all that savings, because the temp company is also getting paid.
In addition, Obama and the Democrats are pushing for a minimum wage increase, to $10.10 an hour—at least that’s what they are demanding now, but don’t be surprised if they up that number.
Employers with workers making under $10.10 an hour are wondering what to do. If they hire new workers at $9.00 an hour, and then Obama gets his minimum wage increase, the employers’ labor costs just shot up. They might have to let some of the new hires go. Or, they could just turn to a temp agency now and scale back if the dreaded increase arrives.
Or take another example. Liberals are trying to expand both maternity and paternity leave. How long would employers be forced to keep a job open for the new parents? Since no one knows if such legislation will pass—or if Obama will claim he has the authority to do it through an executive order—why not just go with a temp until the political future is clearer?
Let’s call it the “knowns and unknowns” of the Obama economy. Employers know he has increased the cost of hiring workers. And they know that if he gets his way he will impose even more cost-increasing mandates, but they don’t know how likely that is to happen, especially with a Republican House and Senate.
It’s in large part because of that uncertainty that many employers are shifting to temps. As the New York Times explained earlier this year: “More than five years into a recovery marked by halting growth, many businesses are still adding temp jobs rather than permanent ones. ‘This is a reflection of business uncertainty, that businesses need to be more responsive, and part of that is keeping their work force flexible,’ said Steven Berchem, the chief operating officer of the American Staffing Association.”
Although liberals and unions blame employers for this trend, it is their own policies that are driving the shift. The vast majority of employers want to be able to hire qualified and dedicated full-time workers, pay them a competitive wage and even provide some benefits, revenues permitting. When employers don’t do that, there’s a reason, and that reason is usually because of a bad economy or bad government policies—and the former is almost always a result of the latter.
When liberals and unions push bad policies, the economy often suffers and employers try to compensate. And turning to temporary services is one of those coping mechanisms. Ironically, temp services may be even less secure than part-time work, because there is less commitment from the employer.
Liberals may denounce the trend, but their economic policies are the primary reason for it.