For two consecutive years, the Congressional Budget Office (CBO) has published an estimate of how many workers will choose to leave the workforce or reduce their work hours as a result of certain protections and subsidies created by the Affordable Care Act (ACA). As was the case last year, conservative media has incorrectly reported that the CBO was projecting potential job losses stemming from Obamacare.
CBO Report Shows Millions Of Workers Can Reduce Work Hours Thanks To ACA
CBO: Obamacare Will “Reduce The Amount Of Labor That Workers Choose To Supply” Over Next Decade. A December 2015 working paper from the Congressional Budget Office (CBO) predicted that health care and workplace reforms enacted by the Affordable Care Act will make the the amount of labor American workers “choose to supply” 0.86 percent smaller over the next decade than would be expected without the law. In total, the labor force will be “about 2 million full-time-equivalent workers smaller” as a result of ACA than it would otherwise be. Most of the change in worker hours and labor supply will result from lower-income workers voluntarily choosing to work less thanks to Medicaid expansion, insurance reform, and government subsidies providing access to private health insurance outside of work (emphasis added):
The Affordable Care Act (ACA) will make the labor supply, measured as the total compensation paid to workers, 0.86 percent smaller in 2025 than it would have been in the absence of that law, the Congressional Budget Office estimates. Three-quarters of that decline will occur because of health insurance expansions, which raise effective tax rates on earnings from labor--for instance, by phasing out health insurance subsidies as people's income rises--and thus reduce the amount of labor that workers choose to supply. The labor force is projected to be about 2 million full-time-equivalent workers smaller in 2025 under the ACA than it would have been otherwise. Those estimates were based mainly on CBO's calculations of the effects of the law's major components on marginal and average tax rates and on the agency's analysis of research about the change in the labor supply resulting from a change in tax rates.
The ACA expands health insurance coverage by offering subsidies to certain people who purchase insurance through health insurance exchanges; by establishing rules that make it easier or less expensive 6 for people with higher expected health care costs to obtain coverage; and by expanding eligibility for Medicaid. CBO estimates that in 2025, about 25 million people, on net, will gain health insurance coverage as a result of the law. CBO further estimates that those provisions will make the labor supply, measured as the total compensation paid to workers, 0.65 percent smaller in 2025 than it would have been otherwise (see Table 1 on page 2). The exchange subsidies will account for most of that effect. [Congressional Budget Office, December 2015]
CBO Study Shows Obamacare Frees Workers From “Job Lock”
MSNBC: CBO Found Workers Leave By Choice, While “Much Of Media” Claim It Hurts Jobs. On December 8, MSNBC's Steve Benen discussed how some workers “will be able to leave their full-time jobs -- by choice -- because of the available benefits” created by the ACA. Benen noted that the CBO report proves Obamacare will free millions of workers from something called “job lock” -- a phenomenon where employees remain in their current employment solely for healthcare benefits - and added that many media outlets were falsely reporting the CBO findings as evidence that the law is “hurting job creation”:
Nearly two years ago, the CBO initially found that, thanks to the Affordable Care Act, in the coming years, many Americans will be able to leave their full-time jobs -- by choice -- because of the available benefits.
Much of the media interpreted this as evidence of the ACA hurting job creation and causing mass layoffs, but that isn't what the findings said at all. In fact, this was good news for the reform law, not bad -- we're talking about a feature, not a bug.
One of the purposes of “Obamacare” is to help end something called “job lock.” The phrase describes a dynamic in which many Americans would like to leave their current jobs - to retire, to start a new business, whatever -- but can't because they and their families need the health benefits tied to their current job. [MSNBC.com, The MaddowBlog, 12/8/15]
Mother Jones: “Obamacare Isn't Forcing Anyone To Do Anything.” On December 8, Mother Jones' Kevin Drum explained that the Affordable Care Act does not force people to stop working, and that the law's overall impact on the labor market “is small.” Mother Jones reported that the effect from Obamacare ending “job lock” is not is not new and “shouldn't surprise anyone who's been paying attention”:
CBO's specific estimates of reduced work incentives may be wrong--they strike me as a bit high-- but their general conclusion is both correct and well-known. Tax increases do reduce incentives to work. Decoupling insurance from employment does reduce the number of people who work solely because they need the insurance. And means-tested benefits do create the equivalent of high marginal tax rates as income increases, which reduces the incentive to work more.
There's nothing new here. Obamacare does change work incentives in certain ways, though the effect is small: about 1-2 percent of the workforce by 2025. But it doesn't force anything. There are no “broken promises” or “catastrophic failures” to rant about. Just some small marginal effects that shouldn't surprise anyone who's been paying attention. [Mother Jones, 12/8/15]
Fiscal Times: CBO Not Looking At Jobs, But Hours Worked. On December 8, The Fiscal Times stated the CBO is not actually measuring job loss, but is “making projections about aggregate hours worked and the total number of workers who choose to stay in the workforce.” The Fiscal Times went on to discuss why someone might choose to leave the workforce as a result of Obamacare, namely that they would not fear losing their access health care:
Republican foes of Obamacare and some news organizations seized on the CBO report as evidence that the controversial health care law would eliminate or “kill” 2 million jobs by 2025.
But the CBO isn't looking specifically at job loss. It's making projections about aggregate hours worked and the total number of workers who choose to stay in the workforce: “The labor force is projected to be about 2 million full-time-equivalent workers smaller in 2025 under the ACA than it would have been otherwise,” the agency wrote. That is, fewer work hours will be logged and paid for, the rough equivalent of 2 million jobs. But those two things -- reduced hours across the economy and total jobs -- are different things. And it's important to note that the reduction in hours worked is relative to the number of hours that would have been worked in the absence of the law; in either case, total work hours continue to grow into 2025, it's just a matter of by how much.
There are several factors at play that could result in a slight shrinkage in the labor force, according to CBO. For instance, lower-wage earners might decide to cut back on their hours or quit menial jobs altogether without fear of losing health care coverage because of their subsidized coverage under the new law. [The Fiscal Times, 12/8/15]
Conservative Media Misread Similar CBO Report Before To Attack Obamacare
2014 Coverage: Right-Wing Media Outraged Americans Can Choose To Work Less. In February 2014, the CBO reported that Obamacare reforms would reduce the workforce by “about 2.5 million” full-time-equivalent worker hours in 2024. Conservative media attacked the idea that some Americans may choose to work less as a result of health care reform, reframing the report as proof that the ACA would kill jobs. Fox Business host Stuart Varney claimed that the reduction in workers' hours was “a complete reversal of the American work ethic.” The Wall Street Journal claimed health reform is a “job destroyer” that reduces “economic mobility.” Jennifer Rubin of The Washington Post claimed Obamacare induces “sloth to get government benefits.” [Media Matters, 2/4/14; 2/5/14]
Right-Wing Myth That Obamacare Kills Jobs Has Repeatedly Proven False. Conservative media outlets have spent five years falsely claiming that Obamacare is a threat to the American economy and is holding back job creation and economic growth. Despite innumerable dire warnings from right-wing media, numerous studies have confirmed that the ACA “had virtually no adverse effect” on the job market, which is exactly what health policy experts have always predicted. [Media Matters, 9/22/15]
Right-Wing Media Claim CBO Report Shows Obamacare Killing Millions Of Jobs
Wash. Examiner: “Obamacare Will Result In 2 Million Fewer People Working.” On December 7, The Washington Examiner falsely claimed the CBO was reporting on the number of people working, not hours worked. The Examiner incorrectly claimed the CBO reported that “2 million fewer people” would be working in 2025 because of Obamacare mistakenly argued that “most” of the change in the labor force is the result of taxes -- in fact, according to the CBO, tax policy changes are responsible for less than one-quarter of the labor force disruption:
Obamacare will result in 2 million fewer people working in 2025, the nonpartisan Congressional Budget Office estimated Monday.
Under the Affordable Care Act, “some people would choose to work fewer hours; others would leave the labor force entirely or remain unemployed for longer than they otherwise would,” the working paper published by the budget office says.
The estimate of 2 million fewer people in the labor force by 2025 is smaller than previous projections from the budget office. In the past, it has estimated that the number could be as high as 2.5 million
The budget office's calculations attribute most of the labor-force suppressing effects in the law to its direct taxes, such as the added payroll taxes on high incomes, as well as the implicit taxes created by the phaseouts of the law's subsidies. But part of the reduction in the labor supply would come about because workers who have new access to insurance outside of work would retire earlier than if the law didn't exist. Economists say that such workers suffer from “job lock.” [The Washington Examiner, 12/7/15]
Fox Falsely Claims CBO Report Says Obamacare Will “Reduce The Labor Force.” On the December 8 edition of Fox News' Special Report with Bret Baier, Fox correspondent Rich Edson falsely claimed that the CBO report showed Obamacare would cost 2 million American jobs over the next decade (emphasis added):
SHANNON BREAM (HOST): Critics of the president's healthcare law now have a new set of numbers to back up their claims that Obamacare is hurting the economy. It comes as the fight intensifies over the money spent on the bureaucracies that sell the insurance to the public. Correspondent Rich Edson looks at the statistics and what both sides are saying about them.
RICH EDSON (SPECIAL REPORT CORRESPONDENT): The Obama administration contends the Affordable Care Act is working, improving, and serving millions. Republicans claim the administration has wasted billions on a flawed system and this morning, questioned federal spending on state-based insurance exchanges, online marketplaces where Americans shop for subsidized health insurance. The administration granted states about $5.5 billion to establish these insurance exchanges.
EDSON: After their state spent hundreds of millions of federal dollars, administrators in Oregon, Hawaii, and Nevada, have scrapped their state exchanges and instead, joined 34 states already using the federal government's site -- healthcare.gov. Officials say they cannot predict if more state exchanges will close. Also this week a working paper from the Congressional Budget Office claims the Affordable Care Act will reduce the labor force by about two million full-time workers over the next decade.
EDSON: Of a similar analysis, the White House wrote last year that the ACA will make it easier for people to take a risk and start a business. Take time out of the labor force to raise a family, or retire when they are ready. Republican committee aides say their investigation into Obamacare continues, they're investigating the non-profit government-funded health care cooperatives, more than half have failed. Democrats say these investigations and committee hearings are simply hampering Obamacare's implementation, Shannon? [Fox News, Special Report with Bret Baier, 12/8/15]
FoxNews.com: CBO Report Is “Latest Blow To President Obama's Signature Health Insurance Plan.” On December 9, FoxNews.com published a misleading article portraying the CBO report as “the latest blow to President Obama's signature health insurance plan” and highlighting that “Republicans hailed the report as yet more proof that the controversial law is not working.” [FoxNews.com, 12/9/15]
Townhall: CBO Report Confirms That Obamacare “Would Slow Economic Growth And Slow Job Creation.” In a December 9 post for the right-wing blog Townhall, Guy Benson misleadingly claimed that the latest CBO report confirmed that the Affordable Care Act “would slow economic growth and slow job creation,” referring to Obamacare as an “unpopular, harmful law.” [Townhall, 12/9/15]