ObamaCare Is Not Destroying Jobs

CBO 2014Let’s do a little dive into the CBO report (pdf) that is wrongly being reported as, ObamaCare Will Cost America More Than Two Million Jobs. This is not at all what the CBO report actually says. But I do think the CBO screwed up by presenting this convenient factoid for conservatives to spin. And it isn’t the first time they’ve done this. They should be more careful.

What the CBO actually said is that ObamaCare will reduce the number of hours worked by people that is equivalent to 2.3 million jobs. The vast majority of this reduction is workers cutting back because they are now working more hours than they want to in order to keep their health insurance. (I will discuss the others below.) For example, a lot of people work full time when they would rather work part part because they have to work more to get health insurance. The fact that these people will cut back on their hours is a good thing, not a bad thing.

Of course, to modern conservatives, it may be a bad thing. Again and again, we have seen major conservative politicians calling for things like an end to unemployment insurance because they feel that more desperate people will find jobs quicker. A similar argument can be made for forcing people to work more hours than they want. Of course, conservatives are not making this argument. They are instead acting as though ObamaCare will destroy two million jobs. This just isn’t true.

People who cut back on their hours will create more slack in the labor marker. According to the CBO, the first effect will be to put upward pressure on wages as companies try to keep employees by paying them more. To me, this would imply that companies create new jobs to offset the lower hours that current employees want to work. That would be what they would do if businesses acted the way conservatives always claim: rationally. But that doesn’t seem to be the case. The CBO says that any actual job losses or gains will be negligible. Companies will apparently just live with reduced productivity. But the main thing is that ObamaCare is not causing these people to lose their jobs; it is giving them more freedom so they can work as much as they want.

There is another aspect of ObamaCare that is not so good. This is a problem with all means tested programs. Some people will get incentives to work less because the more they work, the less healthcare subsidy they get. Almost two years ago to the day, I wrote about this in, Catch 22 for Poor in America. What happens is that people who get this kind of government assistance experience huge incentives not to work more because of benefit cuts. For example, consider someone who gets $100 in food stamps per month but who is right at the edge of qualifying at all. If he makes $50 more per month, his food stamps will be cut off. So by working more, he comes out with $50 less per month. That’s a huge disincentive. (The actual effect is generally smaller because benefits are cut gradually.)

(Note: this never happens with taxes. I’m sure everyone has heard stories of a guy who got a raise but ended with less money because he was bumped up into a higher tax bracket. This can’t happen because we have marginal tax rates. The new 39.6% top tax rate does not apply to all income of people who make over $400,000 per year. That is the rate on all income above $400,000. See: Of Puppets and Marginal Tax Rates.)

The same thing is going on with ObamaCare. Personally, I think this is a small price to pay for the benefits of the program. But if conservatives were really concerned about this problem, they would do something about the disincentives in other welfare systems. And they would have backed “Medicare for all” instead of this cumbersome “free market” approach in ObamaCare. But of course conservatives don’t do these things because they don’t care. This is just a convenient opportunity to misreport information in the name of clubbing ObamaCare some more.

The bottom line for all of this is the 2.3 million full time equivalent hours that ObamaCare will cost is mostly a good thing—a very good thing. But I’m sure that this new conservative talking point will be with us for years. Facts don’t matter to the conservative movement. And in a fundamental sense, facts don’t matter to the media. It is just easier for them to do their both sides now routine, “Republicans say ObamaCare will cost over two million jobs but Democrats counter that this isn’t true. Who can say what’s true?!” Well, now you can.

Update (6 February 2014 8:27 pm)

The CBO says that Obamacare overall will create jobs:

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About Frank Moraes

Frank Moraes is a freelance writer and editor online and in print. He is educated as a scientist with a PhD in Atmospheric Physics. He has worked in climate science, remote sensing, throughout the computer industry, and as a college physics instructor. Find out more at About Frank Moraes.

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