Obamacare Job Killer...Not So Fast
NEW YORK ( MainStreet) Earlier today the Congressional Budget Office released a report that made it sound like Obamacare will kill 2.5 million American jobs. The news went viral, with political opponents of the bill claiming vindication by the well-respected Congressional Budget Office. See, for example, this tweet from a spokesman for the National Republican Congressional Committee: "There is no way to spin this. Because of #ObamaCare, there will be 2.5 million less jobs in our economy. #Simple."
Unfortunately it's not #Simple, not by a long shot. In fact, here's a good rule of thumb for analyzing how massive pieces of legislation impact the largest economy in the world: if you think it's #Simple, you've probably got it wrong.
The 2.5 million jobs number comes the following passage in the CBO's labor outlook report:
"The reductions in CBO's projections of hours worked represents a decline in the number of full-time equivalent workers of about 2.0 million in 2017, rising to about 2.5 million in 2024. Although CBO projects that total employment (and compensation) will increase over the coming decade, that increase will be smaller than it would have been in the absence of the ACA."
If you stop reading the report right there, it does seem straightforward. Thanks to the Affordable Care Act, 2.5 million fewer people will have work over the next ten years, and will also take a bite out of total compensation while it's at it. Context is everything, though, and if you keep reading the rest of the paragraph (not even the report, just finish to the next carriage return) you'll find out that:
"The estimated reduction stems almost entirely from a net decline in the amount of labor that workers choose to supply, rather than from a net drop in business demand for labor, so it will appear almost entirely as a reduction in labor force participation and in hours worked relative to what would have occurred otherwise rather than as an increase in unemployment... (Emphasis mine.)"
The critical part is in that last line. If the ACA were killing jobs, any reduction in employment would correspond to at least a short term rise in unemployment as workers who lost their jobs due to health care reform went out looking for new ones. That's not what the CBO says is going to happen.
Instead this report predicts that some workers will choose to leave jobs they don't want, because they now have the freedom to do so. These are the workers for whom our employer based health care has created a form of indentured servitude. They want to leave but can't get insurance anywhere else.
The CBO's findings tell us that as the provisions of Obamacare kick in those workers will begin to leave the labor force voluntarily: "ACA will reduce the total number of hours worked... almost entirely because workers will choose to supply less labor." This isn't a surprise; it's one of the goals of health care reform. Workers will now have choices and some of them will choose to leave.