Saturday, September 3, 2011

The Paradox of Zero Jobs, Health Care, and Obamacare

A statement that seems contradictory, unbelievable, or absurd but that may be actually true in fact.

Webster’s New World Dictionary definition of Paradox

A zero is a zero in any language.


September 3, 2011
- Today's New York Times front page headline says it all. In bold print, it reads, "ZERO JOB GROWTH LATEST BLEAK SIGN FOR U.S. ECONOMY." President Obama has a problem. After more than 2 ½ years of his presidency, this coming Thursday night, he must explain why his policies generated zero jobs in August, the first time zero job growth has occurred since the Great Depression, and why his jobs program will solve or at least alleviate the problem.

The Paradox

His will not be an easy speech to deliver. He must explain a paradox as it relates to health reform.

Health care is the most prolific job creator in the American economy. According to the U.S. Department of Labor Statistics, despite the overall zero growth in jobs, health care employment rose by 29,700 jobs in August, and the sector has created 205,100 new jobs in the first eight months of 2011, accounting for 22% of the 930,000 non-farm payroll additions in the overall economy in 2011.

Yet health care, which comprises 1/6 to 1/5 of the overall economy, is the sector he proposes to overhaul and perhaps downgrade, partly by paying hospitals and doctors, its principle employers, less, and partly by creating an Independent Payment Advisory Board, with the power to reduce payment to these major employers.

Obamacare as Jobs Killer

President Obama has another, morefundamental problem of even greater magnitude. The nation’s employers regularly list Obamacare as either the number one or two reason they do not hire more employers. They cite uncertainties and increased expenses of meeting and paying for government standards for health plans.

Here Grace Marie Turner of the Galen Institute explains why Obamacare is a jobs killer in a September 2 Op-Ed piece in The New York Post, which I quote in part.

“In the early months of 2010, the economy was starting to show signs of life after the recession. Then Congress passed the president’s health-overhaul law.

Debate over the ObamaCare law’s potential impact on hiring and the economy has been fierce from the start. The president promised it would be a boon to both; then-Speaker Nancy Pelosi said the law would create 400,000 jobs “almost immediately.” Others argued the law would make businesses much less likely to hire new workers.

That debate should now be over.

The Heritage Foundation’s James Sherk recently released a paper comparing the rate of net job growth before and after the passage of ObamaCare in March 2010. The findings show that job creation came to a screeching halt at the time ObamaCare was enacted.

The economy slowly started to recover over the next 15 months; private employers began hiring workers at an average rate of 67,600 per month (net of layoffs). The economy’s high point came with the April 2010 report, when 229,000 jobs were added.

But ObamaCare was signed into law in late March, and the hiring freeze began. In the following months, the economy added an average of just 6,500 jobs per month (net of layoffs) -- less than a tenth the pre-ObamaCare average.
There’s good reason to believe that the health law is a major contributor to the hiring halt.

In a recent US Chamber of Commerce study, 33 percent of business owners cited Obama--Care as either the biggest or second-biggest reason they’re not hiring new workers.

Those findings were backed up by the words of Dennis Lockhart, president of the Federal Reserve Bank of Atlanta, in a speech earlier this summer: “We’ve frequently heard strong comments to the effect of ‘My company won’t hire a single additional worker until we know what health-insurance costs are going to be.’

How does ObamaCare discourage hiring?

First, it adds unknown costs to hiring new workers. Companies already must consider the cost of taxes for Social Security, Medicare, unemployment insurance and workers’ compensation when hiring new staff. combined with health benefits, these costs explain why a $50,000-a-year employee costs a company $62,500 to $70,000 (according to MIT business professor Joseph Hadzima). ObamaCare adds new costs by forcing employers to either provide workers with expensive, government-approved insurance or pay a fine.

The health law also discourages small businesses from becoming mid-size businesses because the mandate to provide insurance kicks in once you reach 50 or more employees. This is profoundly wrongheaded. Small business is the engine for job growth in America, but a recent survey found that 70 percent have no plans to increase hiring in the next year.

As for those companies that already have 50 or more workers, the burden of having to buy expensive government-approved policies (or pay penalties) discourages them from hiring all but essential staff. Indeed, larger companies are doing everything they can to pare back on entry-level jobs and using automation to avoid the added cost of mandatory health insurance for lower-income workers. McDonald’s and CVS drug stores, for example, are replacing some human order-takers and cashiers with electronic systems.

This especially hurts entry-level would-be workers who need jobs so they can get the skills to enter the workforce. Is it any surprise that teen unemployment has now hit 25 percent? The jobs they need are evaporating because of ObamaCare.

The evidence now is clear that ObamaCare is discouraging employers from hiring. The question is how long the president will continue to sacrifice the economy for the sake of his signature legislation.”

President Obama has some explaining to do. He might begin by explaining why employers don’t choose to share the sacrifice or create the jobs he so often calls for.


I close with two modern variations of old nursery rhymes.

Barack, be nimble
Barack, be quick
Barack, better jump over the mishandlestick


Humpty Dumpty sat on a wall,
Humpty Dumpty might have a great fall,
All the Democrats’ horses,
And all the Democrats’ men
May be unable to put Humpty Dumpty together again.

But fear not, like Alice in Wonderland, President Obama, given his likability, rhetorical skills, and one billion dollars in campaign funds, will find his way out of the health reform economic rabbit-hole.

Tweet: Obama in an economic rabbitt-hole: health job growth booms while businesses don't hire because of Obamacare.

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