What is the effect of Obamacare on “The Great Resignation?”

A lot has been written recently about “The Great Resignation” and how many people have left their work for greener pastures. You also can walk/drive down the street without seeing “help wanted” or “we are hiring” banners for everything from retail to restaurants to warehouses. It seems like companies are having to deal with major hiring issues over the last year (I know my company has).

There have been a lot of theories thrown out there, including the generous benefits that were given out during COVID, a mismatch of skills vs needs, and even so far as laziness on the part of some workers (lol on that comment). However, once key item I think has been left out of the analysis, and is one that FIRE people are well aware of. I speak of the Affordable Care Act or “Obamacare.”

Before ACA, most workers got their medical benefits from their job, and to leave your job, you had to have one lined up with benefits – thus reducing the ability of people to switch. In addition, many service jobs (restaurants, retail, etc.) didn’t have medical, or had poor medical. In the end, a lot of people continued to work even at jobs they didn’t want.

With ACA, if you earn a lower wage, you can get subsidies that will dramatically reduce your medical costs. Where I live, minimum wage is $13/hour, or $26,000/year for a full-time job. With ACA subsidies, a 25 year old male would pay roughly $27/month for health insurance, or roughly 2 hours of paid labor. With that low cost, they could work sporadically, and still be covered. It also lends itself to job mobility, because if you are the one paying your healthcare (not your company) then if a better job comes along, you can jump immediately. I think this is a key reason why you are seeing folks being able to resign now.

Still, there are a lot of other reason to consider. One of the best analysis on this is the Wall Street Journal work on it (see video on it here). They go over how certain job areas saw a dramatic drop off in March 2020 (when Covid hit) and these are only just starting to recover (retail, restaurants, etc.) but some job functions (Warehousing, IT, etc.) actually grew from March 2020 on. A lot of people who got let go in retail took higher paying jobs with better benefits in warehousing (my industry). Now they’re being asked to go back to a retail job for lower pay & no benefits, and which could go away again in another pandemic. Not going to happen.

I think we are in for labor shortages for a while now – which is actually very historic for the US. For most of our history, there has not been enough labor for all the work that has been needed to get done – which is one of the reasons the US embraced the industrial revolution and immigration. People may need to get used to slower service at restaurants and retail stores not being open on Thanksgiving, Christmas and at 10pm at night.

Maybe that’s a good thing.

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Mr. 39 Months.

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