CBO: Obamacare Will Impact Labor Supply, Not Labor Demand

The CBO’s report specifically states that the impact of the health care reform on employment will not be felt as an “increase in unemployment” or “underemployment.” The original source of the concern for job loss was a 2010 report from the CBO, which similarly said the Affordable Care would have a small effect on employment “primarily by reducing the amount of labor that workers choose to supply.” At the time, the agency’s prediction was slightly lower, with estimates set at a 800,000-worker decline. This decrease in the amount of labor in the economy would amount to one-half of 1 percent, according to the report.

The CBO-reported decline of full-time-equivalent workers, which the Republican Party translated into a loss of actual jobs, was instead meant to imply that individuals may choose to work fewer hours if they receive subsidies to help buy insurance or retire early if close to retirement.

As economist Dean Baker told the Los Angeles Times, this decline in the CBO’s full-time-equivalent categorization is actually a beneficial effect of the law and evidence that the health care reform will achieve one of its main goals. It helps “older workers with serious health conditions who are working now because this is the only way to get health insurance. And (one for the family-values crowd) many young mothers who return to work earlier than they would like because they need health insurance. This is a huge plus,” he said to the Times.

It is also important to remember that while the CBO notes how many full-time-equivalent jobs will be lost, that metric is merely an expression of hours worked. In total, the Affordable Care Act will reduce the total hours worked by the American labor force by approximately 1.5 percent to 2 percent from 2017 to 2024.

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