As Labor Day Passes, Labor Unions’ Anger Over Obamacare Grows

“This Labor Day weekend, as we gather with family and friends, we’ll also come together as a nation to honor some of our own – the working men and women of America who, across the generations, built this country up and helped make us who we are today,” President Obama said in his Weekly Address in honor of Labor Day. “For generations, it was the great American middle class that made our economy the envy of the word. And as long as I’m President, I’m going to keep fighting to make sure that happens again.”

But while President Obama makes token gestures to appease his labor supporters, the anger of unions is coming to a head over one of the president’s signature laws: the Affordable Care Act.

Yesterday, the International Longshore and Warehouse Union decided to cut formal ties with the AFL-CIO over its support for Obamacare.

“It is with regret but resolve that we have come to the point where the International Longshore and Warehouse Union must cut formal ties with the AFL-CIO,” ILWU president Robert McEllrath wrote in a letter to AFL-CIO President Richard Trumka.

“President Obama ran on a platform that he would not tax medical plans and at the 2009 AFL-CIO Convention, you stated that labor would not stand for a tax on our benefits,” McEllrath continued. “Yet the Federation later lobbied affiliates to support a bill that taxed our health care plans.”

McEllrath is referring to the Affordable Care Act’s tax on “gold-plated health plans” that the labor unions have been so successful at getting for their workers. Employees are generally more willing to accept generous health benefits in lieu of higher wages because the tax code is written so that health benefits don’t count as taxable income. That means that each dollar of worker compensation in the form of health benefits is worth more than a dollar of compensation in the form of wages.

But Obamacare changes that calculus by imposing a 40 percent excise tax on premiums above a certain threshold. Hence, the backlash by workers who feel they were hung out to dry by a union they felt was supposed to protect them.

The data shows that McEllrath, and the members he represents, are right to be concerned. A recent paper by University of Chicago economist Casey B. Mulligan, first cited by Ira Toll of Reason, found that the Affordable Care Act has created “a massive 17 percent reduction in the reward to working.” He then concludes that “it is unlikely that labor market activity will return even near to its pre-recession levels as long as the ACA’s work disincentives remain in place.”

The Longshoremen’s defection likely won’t be the last of the union complaints.

The drumbeat for change began in April when the United Union of Roofers, the first union to publically support Obamacare, also became the first to call for its repeal.

In May the United Food and Commercial Workers International Union joined in asking for changes. In an op-ed, the workers said that the ACA “creates unstoppable incentives for employers to reduce weekly hours” and “push them onto the exchanges where many will pay higher costs for poorer insurance.”

Then in July, representatives of three of the nation’s most powerful unions wrote a letter to Harry Reid and Nancy Pelosi warning that Obamacare would “shatter not only our hard-earned health benefits, but destroy the foundation of the 40 hour work week that is the backbone of the American middle class.”

“Time is running out,” the letter continued in an increasingly harsher tone. “Congress wrote this law; we voted for you. We have a problem; you need to fix it. The unintended consequences of the ACA are severe. Perverse incentives are already creating nightmare scenarios.”

Finally, in August, the AFL-CIO, the confederation of all labor unions, finally stepped up to the plate in defense of their members, albeit in the most innocuous terms possible.

“We’ve been working with the administration to find solutions to what I think are inadvertent holds in the act,” AFL-CIO president Richard Trumka told reporters. “It still needs to be tweaked,” Tumka repeated before admitting “we made some mistakes.”

As it turns out, if President Obama really wants to live up to his Labor Day message of helping the middle class worker, the first thing he should do is repeal Obamacare.