July 24, 2014
Legislation proposed in the House by Democratic representatives George Miller and Rosa L. DeLauro this week would make the labor market even more rigid than it is already. The proposal would regulate part-time jobs by increasing the price of on-call work and limiting flexibility in part-time scheduling will only hurt those the law is ostensibly trying to help.
Of course, Senator Elizabeth Warren thinks this is a great idea, and she plans to propose her own version of this job-killing bill in the Senate.
Economics 101 tells us that — with a few exceptions — when the price of goods and services increases, because of government regulations or other factors, the demand for them decreases. If politicians make the cost of hiring full-time workers more expensive, firms will hire fewer full-time workers. The same is true when politicians increase the cost of hiring people part-time.
We don’t need to look far to see this theory in action. In an already-strained economic environment, employers worried about their financial future and became reluctant to hire new employees full-time. The implementation of the president’s health-care law compounded the problem, inducing some employers to shift their demand for workers in anticipation of higher labor costs. The law requires employers of more than 50 workers to purchase health insurance for any full-time employee — defined as one working more than 30 hours per week — or face a fine of $2,000 per worker.
The results were just as economics predicts. The law gives some businesses an incentive to cap employees’ hours right below the full-time threshold so that they can avoid the extra costs, and the effect started to become most apparent in the retail and fast-food industries. Employers adjusted to the costs imposed by the new law by lowering their labor costs to a level that is sustainable to their businesses.
The health-care law is instructive in another way: Many current federal policies are themselves causing the problems that this new regulation attempts to solve. Rather than create new problems, Senator Warren et al. should stick to repealing their earlier “solutions.”
This article originally appeared at National Review Online.