When Papa John’s CEO John Schnatter says Obamacare will force many chain restaurants to reduce their employees’ hours, he’s half-right.
A lot of restaurants are already cutting workers’ hours, and if Papa John’s begins to rely more on part-time labor then it will just be one of many large corporate chains to do so.
A few of the businesses that are already doing that—such as Darden Concepts Inc., the owner of Olive Garden and Red Lobster—have said, like Schnatter, that they need to reduce costs because of the burden Obamacare places on them. But that’s where they’re wrong: despite what Schnatter might tell you, Obamacare has barely anything to do with it.
The cost of the Affordable Care Act to employers is only one of several expenses associated with full-time, rather than part-time, labor. Even before the law’s provisions kick in, many companies offer their own versions of health care to full-time employees. Then there are the other costs, such as retirement benefits, taxes, sick leave, and so forth.
The fact is that employers always have an incentive to avoid paying these costs whenever possible, which is why chain restaurants were relying increasingly on precarious part-time workers before any of Obamacare’s provisions even kicked in. As Mortin Zuckerman recently reported in The Wall Street Journal, ”Over the past two years, the food service, retail and employment-services industries have added a total of 1.7 million low-wage jobs, fully 43% of America’s net employment growth.”
The costs associated with Obamacare may account for some of that rise, but it’s hardly the only factor. You might recall, for example, that there was a little bit of a global financial apocalypse back in 2008: that put the squeeze on corporate profits back when Obamacare was little more than a twinkle in president-elect Obama’s eye. In December of that year, the Bureau of Labor Statistics noted a sharp uptick in involuntary part-time employment [PDF]—meaning work done by part-time employees who would rather have a full-time job somewhere.
The BLS attributed this trend to a “softening in the demand for labor since about mid-2006,” meaning that more and more Americans were seeking work even as companies were becoming less eager to staff up. In that kind of situation, potential employers have the bulk of the leverage: struggling Americans will take work where they can get it, even in precarious part-time gigs.
If the Affordable Care Act means anything for this trend, it means a little bit more of a safety net for previously uninsured part-time workers. The increased cost to large chains will be negligible—about 4.3% more added to their total spending, according to the Urban Institute[PDF]. If involuntary part-time work continues to rise, that will hardly be a leading cause. It’s just a convenient boogeyman that bosses like Schnatter can use to justify shedding decent, stable jobs from their companies.
Tune into MSNBC on Monday at 8 p.m. to hear Ed’s take on Schnatter’s remarks.