Due to Obamacare, 22% of Small Businesses Are Hiring Few Workers or Reducing Salaries

Estimated 250,000 jobs were lost because of the Affordable Care Act

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July 11, 2017

As a result of Obamacare, 22 percent of small businesses reported they are hiring fewer workers or reducing workers' salaries, according to a report from the Mercatus Center.

In addition, 24 percent of large businesses, those with 50 to 199 employees, reported that they were reducing salaries and the number of hires.

Even though roughly half of small businesses said Obamacare did not change their employment practices, 31 percent said they were reducing hours or hiring more part-time workers instead of full-time workers.

Only 11 percent of small businesses said they were increasing salaries and only 10 percent said they were hiring more workers as a result of the Affordable Care Act.

Professor Casey Mulligan of the University of Chicago, author of the study, says the Affordable Care Act has cost businesses roughly 250,000 jobs because of a penalty employers face if they don't provide mandated insurance.

"Thanks to the ACA, hiring the 50th full-time employee effectively costs another $70,000 a year on top of the normal salary and benefits," Mulligan said. "Nationwide, we estimate the ACA-inspired practice of keeping payrolls below 50 has cost roughly 250,000 jobs."

"This does not count jobs lost when businesses close (we didn't survey closed businesses) or shrink because of other ACA incentives," he said. "No doubt a few of the 250,000 lost jobs are replaced at businesses that weren't seeking to duck the 50-employee threshold."

The survey also finds more businesses report they would be better off if Obamacare were repealed.

While small businesses were relatively split on whether or not they were better or worse off, survey results from large businesses show that they will be better off if the law was repealed.

There were 115 small businesses that said they were either much better off or somewhat better off if Obamacare were repealed, compared with 114 small businesses that said they would either be much worse or somewhat worse off.

There were 125 large businesses that said they were either much better off or somewhat better off if Obamacare were repealed, or 37.9 percent of the total. In comparison, only 65 large businesses said they were either much worse off or somewhat worse off if Obamacare were repealed, which was 19.7 percent of the total.

"The ACA is an important reason why the growth rates of employment, wages, productivity, and GDP continue to be substandard," said Mulligan. "Maybe it is time for repeal."