The Potential Effect of the healthcare bill on the underemployment rate

Yesterday the Waco Tribune had an article entitled "Waco companies search for ways to cut insurance costs".  It specifically addresses how the costs are exponentially increasing for small businesses to provide healthcare to their employees.  The bottom line is that either the employers will have to raise their prices and pass it along to their customers, or they will keep their prices the same and reduce benefits while increasing costs to their employees.  Either way, the cost increase to the employers is inevitiable.  What the article does not address is the potential impact on the unemployment and underemployment rates.

One way to avoid a significant increase in healthcare costs is to backfill any open positions with two part time positions rather than one full time position.  This avoids having to pay expensive healthcare benefits, and it also decreases the unemployment rate.  The job market being what it is right now (an employers' market), there is not much motivation for employers to be competitive with benefit packages as many people are just happy to have work at this point. 

The problem comes with the much-ignored underemployment rate.  Just because people have a job doesn't mean that it is providing their financial needs, as happens with underemployment.  Underemployment does not jump start the economy and does not pull an economy out of a recession.

In the past, employers were more likely to hire full time, all things being equal, because it had less mobilization costs and created a more stable workforce.  However, with the increase in healthcare costs, the mobilization costs for two part time employees may not look as bad compared to the healthcare costs for one employee.

So we see yet another potential way in which the healthcare bill will likely hurt the economy thru the underemployment rate.