Effects of Economic Uncertainty on Business Decision Making

Effects of Economic Uncertainty on Business Decision Making

Market uncertainty has never been higher.  Business observers, CEO’s and policymakers have repeatedly raised concerns about the uncertainty of doing business during the ongoing financial and economic crisis of 2007.  No one is sure whether or not people who do business with Uncle Sam will be left out in the cold.  This kind of uncertainty can play havoc with business and with the economy at large.

The Patient Protection and Affordable Care Act (PPACA), widely recognized as Obamacare, was signed into law by President Barack Obama in March 2010. It is intended to decrease the number of uninsured Americans and lower the overall cost of health care in the U.S. Most business owners are concerned about the program’s potentially harmful effects on the cost of employee health care coverage. Charlie McCrudden, vice president of government relations for the Air Conditioning Contractors of America, said “There’s a lot of uncertainty about what contractors will do about providing health care for their employees…” (Anesi).

As uncertainty continues to grow in the markets, so do the changes in employment practices.  During challenging economic times, many businesses are opting to hire temporary and contract workers as opposed to full time employees.  Not only does this hiring practice affect employment rates and the economy as a whole, but is also affects those seeking work and financial stability.

Uncertainty and ambiguity are a key challenge for business leaders today.  Organizations are finding that they must increasingly plan for contingencies in the future.  The rate of change has accelerated, indicating that business leaders must learn how to strike a balance between managing complex issues today and predicting the uncertain issues of tomorrow.  

In this paper we explore the role of uncertainty on corporate America and corporate employment.  First, we investigate the uncertainty caused by the PPACA for American businesses.  We examine these issues further by discussing an example from a member of this group that manages a hospital clinic.  Second, we discover how uncertainty impacts corporate employment, and shifts the ratios between full time workers and part-time/contract workers.  These effects are highlighted through two examples from our team.

As mentioned above, the PPACA legislation was passed in 2010.  Its main purpose was to guarantee health care for all Americans while at the same time reducing the aggregate cost of healthcare for the entire U.S. population.  While most Americans would agree, our prior path of uninsured citizens and drastically increasing health care coverage was not sustainable, however, the policies and implementation of the PPACA have created a great deal of uncertainty in the medical marketplace.

As of January 2014, an estimated 9 million Americans gained health care coverage due to the implementation of PPACA.  An additional 3.1 million adults under the age of 26 also gained coverage under their parent’s health insurance plans.  This influx of new patients, coupled with increased pressure from the government to cut costs, has created rising instability amongst the healthcare providers.  Mandatory technology upgrades, such as costly electronic medical record systems and new quality standards for reimbursements, have fueled uncertainty in the health care market (Kocher, Ezekiel and DeParle).