February 10 2014
ObamaCare Stunts Small Business Growth
Patrice J. Lee
Small business, the engine of job growth and the backbone of our economy, faces tough times ahead thanks to the President’s signature healthcare reform law.
Large companies like Target and Trader Joe’s are already dropping healthcare coverage for their part-time workers. Some smaller companies are capping their payrolls at 49 employees (so-called “49ers”), while others are capping or reducing the hours of their workers below 30 creating “29ers.” As the Wall Street Journal declares, welcome to the strange new world under ObamaCare.
In new evidence of ObamaCare’s negative impact on the economy, the National Small Business Association released a survey of almost 800 small business owners. Its key findings provide insight into the tough decisions small business owners face about healthcare, hiring, and employee benefits.
The most startling finding is that one in three small businesses say they are purposefully not growing as a result of ObamaCare and some are shrinking (i.e. laying off workers).
Here are other key findings:
- Healthcare costs have doubled under President Obama. Small businesses spend $1,121 per employee each month compared to $590 per month in 2009. 91 percent of employers reported increases in their health plan at their most recent renewal, and the majority expect to continue seeing cost increases in the coming year.
- To deal with rising costs, 34 percent of small businesses reported holding off on hiring a new employee while 12 percent report they had to lay off an employee. Fifteen percent report they plan to drop coverage in the coming year—up from just two percent who reported dropping coverage in the last year.
- Overall, 70 percent of small firms (those with fewer than 500 employees) report offering health insurance today, up slightly from 66 percent in 2009.
- Small businesses report spending on average 13 hours and $1,274 per month just on the administrative side of understanding ObamaCare.
Proponents of ObamaCare continue to claim there will be little or no impact on small business. However, that a third of businesses are purposefully not growing because of the rising costs underscores just how small businesses are responding. It’s a misunderstanding of how business works to assume that adding greater costs and regulatory burdens on business will have no impact.
ObamaCare’s rising costs and mandates are creating what economists call perverse incentives. Why should employers not alter their behavior when it means their bottom line will be eaten up or they’ll face penalties from the government?
The industries that will be hit particularly hard are food service and retail, areas where you disproportionately find women and young people. The Administration thought they could bait us with promises of birth control and mammogram coverage through our employers to gain our support, but those services mean little to women and young people who can’t find jobs.
For an economy that is bleeding workers from its workforce, the Administration and Washington have a responsibility to promote policies that will not harm our economy.
Last fall, the Administration delayed the employer mandate (requiring businesses that employ 50 or more "full-time workers" offer health plans to employees who work more than 30 hours a week or face a $2,000 penalty for each uncovered worker). That was a just a politically-motivated tactic to delay the pain to small businesses and workers until after 2014 midterm elections.
You can delay pain only for so long, meanwhile the damage inflicted continues to compound.
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