Does Obamacare Really Kill Jobs?

by from Pacific Standard

The Affordable Care Act was a favorite punching bag at Saturday night’s Republican debate in New Hampshire, as all the leading candidates talked at some point about making the repeal of the law a priority. The Republican presidential hopefuls’ biggest complaint about the law, which we’ve been hearing time and again: that it’s a “job-killer.”

Here, for example, is Ted Cruz at the debate last month in Iowa: “First of all, we have seen now in six years of Obamacare that it has been a disaster. It is the biggest job-killer in this country. Millions of Americans have lost their jobs, have been forced into part-time work, have lost their health insurance, have lost their doctors, have seen their premiums skyrocket.”

And here is Marco Rubio, at the January 15 debate in South Carolina: “How about Obamacare, a certified job-killer? It needs to be repealed and replaced.”

And here’s Jeb Bush at a debate in Cleveland last August: “You get rid of Obamacare and replace it with something that doesn’t suppress wages and kill jobs.”

There’s one problem with this homogenous rhetoric, though: A number of new studies indicate that Obamacare is far from a “certified job-killer.”

The ACA certainly has the potential to reduce employment in this country, as there are a number of provisions built into the law that might affect employers’ hiring practices. The most straightforward of these is the “employer mandate,” which requires businesses with over 50 full-time employees to provide health insurance to at least 95 percent of their employees (and their dependents). Opponents argued that employers might respond to the mandate by slowing their hiring processes, or relying more on part-time employees, and, to be sure, a few high-profile businesses did indicate that the law could change their hiring practices.

A paper that analyzed the effects of the ACA found no convincing evidence the law had resulted in an increase in part-time employment.

There are also a number of provisions in the ACA that might reduce the amount of labor that people choose to supply. For starters, the ACA effectively de-coupled health insurance from employment. For the first time in America, people all over the country could quit their jobs, or work fewer hours, and still purchase private health insurance at a (relatively) reasonable rate, often with a government subsidy.

The ACA’s various credits and subsidies—which phase out as people’s income rises—also may discourage people from taking on that extra weekend shift, if the earnings from those extra hours might push their income above the threshold at which they’re eligible for government assistance. For example, according tocalculations from the Congressional Budget Office, a family of four with an income of $35,775 (the equivalent of 150 percent of the federal poverty line) would have been eligible for a subsidy of approximately $3,038 in 2014. If that family’s income increased by just one dollar, their subsidy would have decreased by approximately $882.

In other respects, however, the ACA has actually removed some employment disincentives. Before the reform, an American on Medicaid whose income exceeded the Medicaid threshold would have been abruptly cut off, which provided a pretty strong work disincentive for workers whose incomes were approaching the Medicaid cutoff. Today, those same adults would be eligible for a number of credits and cost-sharing subsidies if their income exceeded the Medicaid cutoff.

Despite the theoretical work disincentives inherent to the ACA, a number of recently published papers have found no evidence that the law has reduced employment. A working paper released in December by the National Bureau of Economic Research concluded that the Medicaid expansions “had little effect on labor supply as measured by employment, usual hours worked per week and the probability of working 30 or more hours per week.”

That finding is echoed by a another paper published in Health Affairs, which compared labor-market participation among low-income Americans (those who earned less than 138 percent of the federal poverty line) in states that did and did not expand Medicaid. They concluded that the ACA Medicaid expansions didn’t result in “significant changes in employment, job switching, or full- versus part-time status.” A related paper in Health Affairs found no convincing evidence the law had resulted in an increase in part-time employment—something that so many of its opponents warned about.

Of course, none of this is to say the ACA won’t eventually have some effect on employment in this country. The non-partisan (and non-hysterical) CBO has conducted several careful analyses, most recently in December 2015, of how the law will impact labor supply, and it has concluded that the effects aren’t likely to become apparent until after 2016. The CBO predicts that, by 2025, the ACA will reduce total hours worked by 1.7 percent and “will make the labor supply, measured as the total compensation paid to workers, 0.86 percent smaller than it would have been in the absence of that law.”

It’s worth noting, however, the CBO’s somewhat tortured syntax here. The CBO isn’t saying that the ACA will “kill jobs”; it’s saying that it will reduce labor supply—and the bulk of the reduction is expected to come from people choosing to work less. The CBO addressed this last February, when a report it released on the ACA and labor supply resulted in some rather frenzied rhetoric in Washington, D.C. Here’s what Doug Elmendorf, then-director of the CBO, had to say:

Here’s a useful way to think about the choice of wording: When firms do not have enough business and decide to lay people off, the people who are laid off are generally worse off and are therefore unhappy about what is happening. As a result, other people express their sympathy to those people for having “lost their jobs” due to forces beyond their control. In contrast, when the labor market is strong and people decide on their own to retire, to leave work to take care of their families, or to cut back on their hours to pursue other interests, those people presumably think they are better off (or they would not be making the voluntary choices they are making). As a result, other people are generally happy for them and do not describe them as having “lost their jobs.”

Thus, there is a critical difference between, on the one hand, people who leave a job for reasons beyond their control and, on the other hand, people who choose not to work or to work less. The wording that people use to describe those differing circumstances reflects the different reactions of the people involved. In our report, we indicated that “the estimated reduction [in employment] stems almost entirely from a net decline in the amount of labor that workers choose to supply,” so we think the language of “losing a job” does not fit.

It’s not clear that people choosing to work less, at the expense of the government (in at least some cases), is necessarily a good outcome—but it is clear that the ACA is not “the biggest job-killer in this country.”

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