Surveys of small business owners find Obamacare making them much less likely to hire. A Gallup poll reported two-fifths of small business owners saying the law had caused them to hold back on hiring; a fifth said they had let employees go. A separate survey for the International Franchise Association found a third of franchise businesses cutting employee hours in response to Obamacare.

The Federal Reserve reports hearing similar concerns from its business contacts. Variations on a similar theme have filled the Fed’s recent Beige Book reports:

- “Employers continued to express concern about potential cost increases related to the Affordable Care Act,” (Atlanta Federal Reserve Bank)

- “On balance, many firms expressed continued hesitancy caused by concerns about healthcare reform in terms of their overall hiring plans,” (Richmond Federal Reserve Bank)

- “Many of our contacts are concerned about the implementation of the Affordable Care Act and the effect it will have on their total labor cost.” (Cleveland Federal Reserve Bank)

For the short term, at least, Obamacare has made businesses reluctant to hire. For some employers this reluctance will become permanent. Businesses paying near the minimum wage cannot pass on penalty costs through pay cuts. They cannot legally reduce wages. For these businesses Obamacare has permanently increased hiring costs. When the mandate takes effect next year, the minimum cost of hiring a full-time worker will rise to $10.30 an hour.

Employers will respond to these higher costs by shifting workers to part-time status and investing in labor saving technology. Investor’s Business Daily has identified over four hundred employers announcing reductions in hours below 30 a week—the Obamacare definition of full-time work. Both Applebee’s and Chili’s have installed tablets for patrons to order from and pay with—significantly reducing the need for human waiters. The Obamacare mandate will push companies to adopt of such technologies more rapidly, eliminating less-skilled jobs in the process.

Nancy Pelosi once claimed the Affordable Care Act would create four million jobs. Conservative economists argued Obamacare would reduce employment. Increasingly, however, economic analysis has borne out the original conservative criticisms. The CBO now agrees with supply side analysis that finds Obamacare will cause millions to drop out of the labor force. The implicit tax of forgone subsidies has substantially reduced the reward to working—and thus the willingness to work. Rising healthcare costs and the mandate penalties have made employers more reluctant to hire. As Americans and economists have found out what is in the ACA, they have increasingly found it a poor prescription for the economy.

James Sherk is a senior policy analyst in labor economics at The Heritage Foundation. Rea Hederman is director of the Center for Data Analysis (CDA) at The Heritage Foundation.

Image: Flickr/Clever Cupcakes. CC BY 2.0.