It’s the low wages, stupid

It’s the low wages, stupid January 22, 2014

When I was hired for my part-time retail gig, one of the things the HR director and the Day 1 training videos hyped was the excellent health benefits available even to part-time employees. The very nice woman from HR explained that some people worked just one shift a week solely to get those benefits. Sure, the cost of enrolling for them ate up most of their 16-hour biweekly paychecks, but that was still cheaper than trying to buy individual insurance back in 2013.

This benefit is no longer available to part-time employees where I work. It’s part of a trend of big retailers now instead referring their part-time workers to the state and federal exchanges.

Staples is apparently a new member of this club. Target is too.

To understand what’s going on here, you first have to understand why these companies ever offered employee health insurance in the first place. This was not done out of the kindness of their hearts. It was done because generous federal tax subsidies and incentives covered the cost of doing so for these retailers. Employer-based health insurance is subsidized to the tune of more than $200 billion a year.

But now we have the Affordable Care Act which, among other things, defines the “affordable” in affordable care. That definition includes the rule that affordable employer-based coverage cannot cost more than 9.5 percent of household income. Employer-based coverage that costs employees more than that is no longer legally “affordable” — meaning it no longer counts for companies seeking credit for their share of the tax-subsidy gravy train.

So, then, let’s make this easy by picking a nice round number. Let’s say you’re the CEO of Big Boxmart, and your company has determined that the employee’s share of the cost of health insurance needs to be at least $100 a month. Your full-time workers are making $10/hour, or about $1,600 a month. That $100 contribution is only about 6 percent of their income, so you’re good. This counts, legally, as “affordable” and you continue to qualify for the federal largesse that inspired you to offer benefits in the first place.

Your part-time workers, however, are only getting $9/hour. So a part-timer working three shifts a week makes about $864 a month. That $100 monthly contribution would be about 11.6 percent of their income — too much to qualify as legally affordable. You thus have only three options: 1. Reduce employee contributions toward health insurance; 2. Raise wages (if everyone were making just $11 an hour then you wouldn’t have this problem); or 3. Stop offering health benefits for part-time employees.

Two of those options involve improving employee compensation. One involves screwing over your workers.

Which do you choose?

We already answered that question when we said you’re a CEO. If you’re thinking like a CEO, then improving other people’s compensation is never an option. And screwing over your workers is never a problem.

The problem for Staples and Target and all the other Big Boxmarts, in other words, is that they have been underpaying their workers while overcharging them for their benefits. And the Affordable Care Act means that taxpayers will no longer subsidize them for doing that.

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