Heritage: Obamacare Will Increase Employer Costs Per Worker

Thursday, 05 Dec 2013 01:40 PM

By Courtney Coren

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A push is on by Democrats in Congress to increase the federal minimum wage from $7.25 to $10.10 per hour, but Obamacare already raises the cost to employers of hiring full-time workers to more than that, according to the Heritage Foundation.

The increased cost of hiring a full-time worker will begin in 2015 when the employer mandate to provide health insurance to employees who work more than 30 hours per week kicks in. A Heritage report says the cost per worker will rise to at least $12.71 per hour by the time federal or state minimum wage rates, payroll taxes, unemployment insurance taxes, and the cost of providing health insurance, or paying a penalty for denying coverage, is taken into account.

Employers who deny coverage will have to pay a $2,000 after-tax penalty, Heritage reported, noting that most would likely opt to pay the fine over providing health plans that meet Obamacare standards. There is an small business exemption on the Obamacare penalty for the first 30 workers, and companies with fewer than 50 employees can escape the penalty altogether by keeping worker's hours below 30 per week.

Patrick Tyrrell and James Sherk of Heritage said the Obamacare mandate could be disastrous for unskilled workers, who rely on entry level jobs to get their start up the career path.

"It would raise the cost of hiring a full-time worker to at least $12.71 per hour," they wrote. "A worker would have to produce at least that much for a company to break even on that position."

Most workers don't, they said, adding that what they do get out of their low-pay positions is "valuable experience that leads to higher paying jobs and career advancement."

They also add that most employees usually don't stay at minimum wage for long.

"Two-thirds of minimum wage workers earn raises within a year," Tyrrell and Sherk pointed out.

Some economists say increasing costs for employers can result in fewer hours for employees or force companies to raise prices on customers to offset costs.

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