Tuesday, February 4, 2014

ACA and Women's Salaries.

Show me the money, honey.

In this recent New York Times article, Casey B. Mulligan draws our attention to the intended/unintended consequences of the employer mandate, of Affordable Care Act (ACA, on labor market. The article discusses, in particular, how salaries of female labor force will be affected under the new act. It has been observed that employers are trying to cut down on the number of full time employees to avoid paying for their health insurance; therefore, escape the penalty imposed by the government under the ACA. According to the federal law, part time employees can work up to a maximum of 29 hours to continue to be considered part time. There is a strong likelihood of employers cutting down the hours of employees to 29 hours; they are more likely to shave off extra hours from the workers who are already working close to 29 hours. Casey states: because of this, women are the target of such unintended labor force cuts. Women working as full time employees often work fewer hours (almost twice as likely as men) and devote rest of the time taking care of their families. This type of arrangement, which works very well for a many families, is now under threat. Naturally, working fewer hours means less pay. Now, working fewer hours may also mean fewer benefits. Even though, ACA did not invent part-time work regulations, but it may be encouraging small employers to use it in an unwise manner only to comply with the ACA, and thus it may be increasing the gap between salaries of two genders.

Granting that ACA has multiple provisions for women (free preventive care, outlawing gender rating, maternity coverage, and no co pays for certain preventative services e.g. gestational diabetes etc.), the author takes a deep dive into facts and analyses patterns that will emerge in the labor market because of the ACA. It’s a well-known social phenomenon that the part-time work is a female domain. Choosing family over work, perforce results in career breaks and acceptance of more part time work for women. Such a practice ties them down to gender roles (which are far more difficult to fight), further hurting career development. It is a vicious circle. It does not need a rocket scientist to figure out why women are at a greater risk for old age poverty. Although, choosing part time work is detrimental to anybody’s career (not just women), it is precious for economies. In rapidly aging populations, higher female labor force participation helps mitigate the impact of shrinking workforce, and therefore continues to contribute to macroeconomic gains.

Rebuttal to this argument is that, with the economic growth reviving back to pre-recession rates, employers will soon be faced with a dilemma of: either cutting back on full time workers and therefore hiring new part time employees (which could be more expensive), or to just convert part time workers to full time and pay for their benefits. The decision will depend on cost benefit analysis by individual employer. If the economy picks up, then ACA may well be a tool to empower part time workers, hence women. But if it doesn’t then this type of forecasting begs the question: should health care coverage be divorced from employment status? It would be wise to pose a larger question: in light of these facts, shouldn’t there be policies around safeguarding female labor force participation? Solutions to the current problem are not clear but what is clear is that ACA affects almost every aspect of the healthcare industry. It will also cause ripple effects in other industries and the macro economy for years to come.

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