It’s been labeled as one of the primary reasons why job growth in the U.S. continues to lag, but apparently no one at the White House is listening.
Obamacare is set to claim another casualty – the food service industry, one that is known for its low-paying positions and tight profit margins.
Granted, franchisers of all stripes were grumbling about the negative financial effects forced upon them by the massive Obamacare law, with its plethora of rules and regulations. Most attendees to the recent International Franchise Association in Washington, D.C., were complaining about all new federal regulations, but they emphasized Obamacare primarily, the Washington Examiner reported.
Initially, said David Barr, an Atlanta-area Taco Bell and Kentucky Fried Chicken franchiser told the paper, most business owners believed the early reports saying Obamacare would impact them hard were overblown. “They had their head in the sand,” Barr said.
Costs to double, profits to be cut in half
But then he pulled out his PowerPoint presentation that showed how funding Obamacare will cut his, and those of his fellow small business owners,’ profits in half overnight.
“With simple math the small business folks understood, he spelled out that their only choice is to slash employee hours so they aren’t eligible for company-paid health care or stop offering insurance and pay the $2,000 per employee fine,” the paper reported.
Stop right here. You need to understand that this is coming from the mouth of a man, a real business owner, who actually has to make payrolls every two weeks, not some partisan hack trying to score political points. He’s telling you that the impact of Obamacare is not only real but that it’s getting ready to make an already bad employment situation even worse. That’s important to note, given the administration’s continued insistence that the law is not going to hurt employment or small businesses.
Okay, let’s continue.
The paper said Barr has 23 stores with a total of 412 employees. Of that number, about a quarter of them – 109 – are full-time, and of those, he provides 30 of them with health insurance.
Barr said he pays 81 percent of the Blue Cross-Blue Shield policy for those employees, or $4,073 of the $5,028 in annual premium costs for individuals (more for those with a family plan). That adds up to about $129,000 a year; employees, by comparison, pay $995 a year.
Under the law, Barr is forced to provide health insurance for all 109 full-time employees, at a cost of $444,000 – or two and a half times more than his current costs. That’s an increase of a whopping $315,000, or just more than half his annual profit, after expenses, or about 1.5 percent of sales (before you criticize, ask yourself if you’d be willing to cut your take-home pay in half).
Needless to say, Barr says he’s “not paying $444,000.”
Higher costs to businesses will mean fewer jobs, period
So, failing to provide health insurance for his 109 full-time employees will result in a penalty under the wonderful provisions of Obamacare. But the federal fine will amount to about $158,000, or $29,000 more than Barr is currently spending but which is the lowest possible cost to his business under the Obamacare provisions.
So he now sees that figure as his cap; he’ll either cut worker hours (which will raise the under-employed figures and further dampen consumer spending and growth) or replace them altogether with machines (which will worsen the unemployment rate) in order to get his costs down. A third option is to dump his workers on the public health exchange and pay the fine.
“Every business has a way to eliminate jobs,” he said, “but that’s not good for them or me.”
There’s more. Barr says in his experience, most low-wage workers he would have to cover under Obamacare won’t take it because their share at $995 is too high. That means those that the law was set up to help likely won’t see any benefit at all, he says.