Re: Papa Johns' CEO: Obamacare will increase our costs, reduce employee hours
I won't argue the dollars-and-cents because I'm not sure about one thing: does Obamacare say employers have to fully pay for insurance? Or that it has to be available?
They can either "pay for" or they can "get
taxed / pay a
fee /
send more money to the government however you want to describe it" while dumping their employees coverage alltogether.
Given that the tax/fee is significantly less than the cost of insurance, and given that those dumped on the exchanges will be getting Free Money (because there is such a thing as a free lunch) from daddy government to purchase health insurance, Employers who hire large numbers of low-wage employees, but who still try to give them healthcare coverage, will be particularly constrained and forced to dump their people. Especially given that one of Obamacare's more insidious moves is to legally limit the kind of low-cost coverage options such as high-deductible accounts tied to HSA's. That's why
1 in 10 employers are
already planning on phasing out their health insurance (before the thing has even gone into
effect).
And second, I'm not sure you're correct about individual franchises. Can you counter this link?
Why Burger King Doesn't Like Obamacare - Businessweek
If McDonalds is not effected by Obamacare,
then why do they need a waiver?
Ah, I think I see. The individual Franchiser has to have more than 50 employees - so if you figure the average Papa John's has 25 employees, someone who owns two Papa John's is effected whereas someone who only owns 1 is not.
Which, given that lots of owners own more than one,
means this is still pretty bad for the Franchise restaurant business.
...Barr has 23 stores with 421 employees, 109 of whom are full-time. Of those, he provides 30 with health insurance. Barr said he pays 81 percent of their Blue Cross Blue Shield policy, or $4,073 of $5,028 for individuals, more for families, for a total bill of $129,000 a year. Employees pay $995.
Under Obamacare, however, he will have to provide health insurance for all 109 full-time workers, a cost of $444,000, or two and half times more than his current costs. That $315,000 increase is equal to just over half his annual profit, after expenses, or 1.5 percent of sales. As a result, he said, "I'm not paying $444,000."
Providing no insurance would result in a federal fine of $158,000, $29,000 more than he now spends but the lowest cost possible under the Obamacare law. So he now views that as his cap and he'll either cut worker hours or replace them with machines to get his costs down or dump them on the public health exchange and pay the fine. "Every business has a way to eliminate jobs," he said, "but that's not good for them or me."...
That last paragraph there directly ties into our next conversation which is...
But I will argue as to whether or not the increased burden on business will result in less demand for workers. If they need people, they need people.
This is sadly not correct. Labor exists on a supply/demand curve, just like everything else. When you increase the cost, you decrease the demand.
Remember back in 2007 when they raised the minimum wage? Do you remember how all of those self-checkout machines started showing up a couple of months later?
Due to labor cost increases, the machines were now cheaper than people. You may also notice that fewer of the remaining lines were open - resulting in longer lines for us customers and even fewer jobs for low education low experience employees. The first workers to get hurt by these kinds of things are almost always the most vulnerable among us.
If it's the law that they pay for healthcare insurance, then they will begin paying their people less if it's a problem for them. Or they will switch to as many part-time workers as they can (under 30 hours).
Or they will find ways to minimize the now-more-expensive labor in favor of less expensive options. Companies that
can move labor overseas will now face death in the marketplace if they
don't do so faster than their competition. The girl taking your call-in-order at Papa John's doesn't have to be
at the Papa Johns, any more than the guy helping you with tech support has to be at Microsoft HQ.
I'm willing to say that we don't know what effect this is going to have on our economy. We can guess. We can postulate. But the only way we're going to know for sure is when it's actually implemented.
That is correct. It is always possible that everything we
thought we had learned about economics in the last 3 centuries is wrong.