Obamacare Might Make Americans Work a Little Less—So What?

The Congressional Budget Office says Americans will cut their work hours thanks to the health reform law's new benefits. That might just be a good thing. 

White House economics advisor Jason Furman tries to explain Congressional Budget Office math to the assembled press (Reuters)

Obamacare isn't going to kill American jobs. It might kill a tiny bit of America's work ethic, however.

Yesterday, the nonpartisan Congressional Budget Office, Capitol Hill's official number-cruncher, reported that the health reform law would probably encourage more adults to cut back their work hours than it had previously predicted. Why? Because the Affordable Care Act makes it easier to get insurance without a full-time job, and some employees will probably take advantage of its benefits by working less. Figuring out just how many people will respond that way takes some math and guesswork, and, based on a bit of new research, the CBO had changed its estimates.

Ten years out, it said, the Affordable Care Act will crimp the labor force by the equivalent of 2.5 million workers. Some misleading headlines aside, businesses won't really need to hire any less. The unemployment rate won't be affected much, if at all. More adults will simply decide to take it easy.*

Republicans, unsurprisingly, are counting this as a big strike against Obamacare. Democrats, meanwhile, say it's proof that the law makes our convoluted healthcare system a bit more humane. What should you think? How should you feel? Here's a brief guide.

You should feel upset...

...if you don't believe it's ever a good idea to discourage people from working.

Again, Obamacare is designed to make it easier for people to afford insurance without a full-time job. And, unless a Calvinist revival suddenly sweeps the nation, that means some people probably won't feel compelled to work the hours they did before.

Some Americans might specifically choose to work less for fear of missing out on federal aid. The Affordable Care Act extends Medicaid coverage to more low-income adults, and it gives subsidies to some households so they can buy private insurance on the new healthcare exchanges. Because those benefits phase out for higher earners, some workers could decide that they're better off taking home a smaller paycheck while keeping their government help—especially if they can qualify for welfare programs like food stamps as well.

You may or may not object to that on a moral level. But there might be economic reasons to worry as well. America's workforce participation rate—the percentage of adults either looking for a job or in one—is dropping. And it's going to keep dropping as the Baby Boomers age into retirement. That will mean fewer employees paying taxes to support programs like Social Security. The CBO essentially tells us Obamacare will make this problem slightly worse.

You should feel thrilled...

...if you think people shouldn't have to stay in a terrible job just for health insurance.

Most American adults get health insurance through their employer. As a result, many end up stuck in jobs they'd prefer to leave simply because they want to keep their healthcare plan. Policy wonks refer to this as "job lock."

In a way, the CBO report simply says that Obamacare helps cure job lock. And, as Matt Yglesias wrote yesterday, that could be a wonderful thing for many familes. Mothers might be able to cut back their time at work in order to take care of their children. Older workers who don't qualify for Medicare yet might be able to ease up at the office. People are going to see their quality of life improve, and even if it comes at a small economic cost, that's a completely legitimate goal for public policy.

Another point to keep in mind: a little bit of workforce shrinkage might be a completely acceptable tradeoff if it means insuring millions.

You should feel "meh"

...if you realize this estimate is an example of how Washington's policy debates thrive on a false sense of precision and certainty about the future. The truth is, we don't know exactly how people will change their work habits when they're offered government subsidies to buy insurance, and if the CBO were being 100 percent transparent, they would probably provide a range of possible outcomes. Moreover, it's really hard to predict what the job market will look like 10 years from now. If robots really are coming for all our jobs—I'm not being glib; it's possible—we're going to be a lot less worried about workforce participation, and a lot more worried about whether the unemployed can see a doctor.

*Here's the CBO's exact language. Note, it says workforce reductions will be due "almost entirely from a net decline in the amount of labor that workers choose to supply." To wit:

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 businesses’ 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 (that is, more workers seeking but not finding jobs) or underemployment (such as part-time workers who would prefer to work more hours per week).