Twenty-something clothier Forever 21 was the latest company threatened with boycotts when a memo was released with plans of cutting hours for employees. In official company press releases the blame for the reduced hours was assigned to staffing based on projected sales instead of Obamacare , but there can be little doubt that the requirement to buy health insurance for full-time workers next year was a factor.
You really can’t blame the retailer or other employers, however, for cutting workers to avoid the cost of buying or expanding insurance. A company cannot stay in business if they are paying workers $40 per hour in pay and benefits and only making $35 per hour per employee, to use a hypothetical example. It isn’t that they are making thousands of dollars per hour from each employee and want to make $5 more. The margins are very thin for many entry-level positions. The new healthcare law requires the provision of extremely expensive insurance and unless the employee is producing a lot of income for the employer, it won’t be able to cover the costs. It makes sense to cut hours to avoid buying the insurance. The alternative is to lose money until the business needs to close down. Then everyone loses their jobs.
No one is asking the employees either. I’m sure they would love to have great healthcare benefits with fantastic care at no cost to them. They would also probably like to be paid for 40 hours when they only work 20, a new car to drive to work, their meals included free, and three months vacation each year. This does not mean it would be economically possible. I’m sure though that given the choice between having a job without health benefits and not having a job with health benefits, most people would opt for the former.
It seems odd, however, that the reaction by people who hear about the company’s actions is to propose a boycott of the stores. A successful boycott would just mean that the people who were having their hours cut would see their jobs eliminated entirely as the company cut staff and closed stores due to the drop in business. This would be punishing the very people the protesters claim to want to help.
A better solution would be to remove the motivation for the company to cut hours. The way to keep people employed and expand the number of hours available is to not make it more expensive to give someone more hours. You want the cost of each additional hour to drop as is the case normally. In particular, don’t set a step function in cost where adding one more hour results in a huge increase in cost per employee.
The House of Representatives has already passed numerous measures – 37 to be exact – to repeal the healthcare law, but the Senate has never taken the measures up in committee, let alone allowed a floor vote. If you really want to help store clerks, servers in restaurants, and others in low-income jobs, call or write your Senator and ask that they repeal the healthcare law, or at least change it to remove this cost to employers for giving employees more hours. A better plan to reduce the cost and hassle of healthcare was presented in my previous post. If they will not repeal it, then fire them and elect someone who will. And stop electing people who have no clue about economics and how business works and then enact policies that are not economically sustainable.
Let’s rid ourselves of this job killing, hour cutting law and replace it with something based on market principles and demographics that will actually work.
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