Papa John's CEO John Schnatter’s recent statement that the Affordable Care Act will force the pizza chain to raise prices came as good news to Nick Martin.
Martin, a part owner of Ian’s Pizza, a pizza shop with four locations in Wisconsin, said his business has offered full heath care coverage to its 50 full-time employees for years, making it all the more difficult to compete with national chains like Papa John's that pay workers low wages without health benefits.
"This may level the playing field for us,” Martin said of the Papa John's price hike. “If they have to pay for benefits, and that pushes their prices up closer to ours, it will justify what we’ve been paying for and what we’ve been fighting to do the past few years.” (Ian's knows a bit about fighting, having fed demonstrators free slices during last year's protests in Madison.)
Like many of the 60 percent of small businesses that pay employees health benefits, Ian's Pizza has struggled to compete with national chains that enter local markets and undercut existing prices. But Obamacare may give local businesses some breathing room as national chains lose the advantage they once wielded through not providing health insurance, according to Jonathan Gruber, a professor of economics at the Massachusetts Institute of Technology.
Obamacare mandates that businesses with more than 50 workers offer an approved insurance plan or pay a penalty of $2,000 for each full-time worker over 30. “Evidence suggests that when health insurance costs go up, worker wages fall, rather than prices going up,” Gruber said. “If firms are forced to give their workers health insurance, they generally react by paying workers less in wages; they don’t raise the price of goods."
However, in the case of Papa John's, a portion of its employees are already paid at minimum wage, Gruber pointed out. "So you can’t reduce wages for those employees, and the firm may have to increase prices a little bit,” he said.
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