'Restaurant Recession' From Health Care Act? Little Evidence - The ... - New York Times
But industry numbers don’t indicate this is having much of an effect. According to the National Restaurant Association, sales across the industry will be about $780 billion in 2016, up roughly 5 percent over the previous year. If you restrict the focus to fast food, sales are projected to be higher, too — just under 6 percent, to about $223 billion, though the group notes that individual companies and regions may be struggling.
While there were some signs of weakening in the third quarter, the group expects next year to look similar to this one. And it would be hard to blame a change in third-quarter performance on premiums that only adjust at the beginning of each year.
Neither does the data on restaurant industry employment suggest many ill effects. According to the Bureau of Labor Statistics, employment in the “food services and drinking places” industry is up roughly 200,000 this calendar year, and by nearly one million since Americans began buying health care through the Affordable Care Act.
Ben Spielberg of the Center for Budget and Policy Priorities, a liberal think tank in Washington, looked at the rise in premiums that a 27-year-old would pay for a common low-cost insurance plan under the health law. He compared that with employment in food services and drinking establishments over the same period.
The analysis looked at the 33 states in which data on both was available and concluded that there was no correlation between employment growth in the industry and premiums. States where premiums increased more did not tend to have lower employment.
The study’s finding may seem counterintuitive, but it is consistent with the experience of at least some large fast-food outlets. Todd Penegor, the chief executive of Wendy’s, said in an interview on Friday that while health care and rent costs have eaten into consumers’ budgets, his company added stores in 2016 for the first time in years after previously scaling back stores. Mr. Penegor attributed the development to a successful new marketing program and a package of low-cost menu options.
To the extent that some restaurants are struggling, one explanation may be shifting consumer tastes rather than health care costs. A recent survey by the National Restaurant Association suggests that healthier offerings are gaining popularity, which could disadvantage traditional fast-food outlets. “Traffic has been incredibly strong for us,” said Nic Jammet, co-founder and co-chief executive of the salad chain Sweetgreen. “It’s been a great year for us, not just with new store growth and customer acquisition but also our same-store sales have grown nicely, too.”
Even if health care costs are having an impact on certain restaurants, it’s hard to directly point to the Affordable Care Act as the culprit. For one thing, fewer than 7 percent of Americans receive health coverage through the individual state marketplaces, where premiums have jumped, according to the Kaiser Family Foundation, which tracks insurance coverage. “The fact that you had spikes in the premiums of about 7 percent of the people is not going to be determinant of those outcomes,” said Jared Bernstein, a former economic adviser to Vice President Joseph R. Biden Jr.
Mr. Puzder’s second complaint, that the law raises labor costs by mandating that employers cover full-time workers, appears more grounded in reality. It certainly would increase costs for employers who did not previously provide insurance coverage to full-time workers. “We took a big hit initially from what we had paid previously,” said Xavier Teixido, who owns three restaurants in Delaware and had provided full health coverage only to salaried managerial employees before the Affordable Care Act, though he offered a catastrophic illness plan to hourly workers.
Still, it does not appear that the potentially higher costs are motivating employers to reduce the size of their full-time work force, as Mr. Puzder feared. According to data analyzed by Nick Buffie of the left-leaning Center for Economic and Policy Research, the percentage of people who are forced to work part-time even though they prefer to work full-time has fallen dramatically since the Affordable Care Act was enacted. Perhaps more important, worker advocates say, even if the health law raised costs for business, considering only these costs leaves the analysis incomplete. The cost to businesses in the restaurant industry must be balanced against the benefits to workers, which have been significant in many cases.
“The restaurant industry has historically represented one of the largest segments with workers without health coverage,” said Paul Sonn, general counsel at the National Employment Law Project, which advocates on behalf of low-wage workers. “The A.C.A. has had a huge impact expanding access to low-cost and in many cases zero-cost coverage for restaurant workers.”
A question for Mr. Puzder, who has declined requests to comment since he was chosen for the post, is whether his view of labor — and national policy — will be overly shaped by his experience within one corner of one industry.
“We see different goals between a business owner trying to hold down costs and a national policy maker who ought to be focused on making sure that the benefits of growth are fairly and broadly shared,” said Mr. Bernstein. “For a guy like Puzder, suppressing labor costs is a good day at work. For the labor secretary, that’s not the goal.”
Lawrence H. Summers, the former treasury secretary under President Bill Clinton and an economic adviser to President Obama, argues that one key to policy making is to avoid the fallacy of composition, in which what hurts or helps one actor does not necessarily produce the same effect when everyone does it. “If one firm raises wages, that firm may be less competitive,” he said. “But if wages are raised at all firms, spending power may rise, and that may stimulate the economy.”
Mr. Summers added: “This isn’t a left-wing truth or a right-wing truth. You can’t calculate all the effects of a policy just by generalizing from the experience of a business.”
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