Is Obamacare a Job-Killer After All?

The CBO says the law will lead to a decline in employment—but the drop will come from workers opting to work less, not from employers slashing payrolls.

Jonathan Alcorn/Reuters

For years, Republicans have insisted that the Affordable Care Act would tank the economy by reducing employment. The idea that Obamacare was a "job killer" was one of Mitt Romney's favorite 2012 talking points. For just as long, Democrats have been saying that's false—and they've had the experts on their side:

  • Politifact: "The Republican evidence is extrapolated from a report that was talking about a reduction in the labor supply rather than the loss of jobs, or based on measures that weren't included in the final health care law. We rate the statement False."
  • "Republicans have made the overblown claim that the law is a job-killer, but experts predict a small impact on mainly low-wage jobs."
  • Bill Keller: "After years of trying out various alarmist falsehoods the Republicans have found one that seems, judging from the polls, to have connected with the fears of voters. Some of the job-killer scare stories are based on a deliberate misreading of a Congressional Budget Office report..."

So today's Congressional Budget Office Budget Outlook is a little awkward for Obamacare's champions. The report finds that the law will induce American workers will work fewer hours over the next decade, with the following result (emphasis added):

The reduction 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.


That's worth breaking down a little bit more. The effect that CBO is describing isn't actually new, and in fact it has formed the basis for some of the refuted "job-killer" claims in the past. Economists believe there are people who are working today who would rather retire or reduce their hours but have remained in jobs because they need healthcare. With the changes brought about by Obamacare, they can get insurance readily through other means, allowing them to drop out of the workforce or cut down their time on the job. As Sarah Kliff notes, some might also want to cap their hours to remain eligible for ACA subsidies. As CBO puts it, the decline is "almost entirely because workers will 
choose to supply less labor."

The news here is how big the effect is. Back in 2010, CBO estimated there would be a 0.5 percent drop in hours worked; the new estimate works out to a 1.5 to 2 percent decrease. What changed? Basically, they did more calculations and came up with a bigger number: "CBO has now incorporated into its analysis additional channels through which the ACA will affect labor supply, reviewed new research about those effects, and revised upward its estimates of the responsiveness of labor supply to changes in tax rates."

So is the law killing jobs? Even if it isn't driving employers to drop a flurry of pink slips and toss their workers on the dole, this isn't good news for the U.S. economy. And combined with anger at Obama for his broken "if you like your plan, you can keep it" pledge, it's more bad news for the president's and the law's credibility.

The silver lining for the White House is that the report doesn't find any evidence of another GOP talking point: that businesses are moving full-time workers en masse to reduced hours so that they don't have to pay for their insurance. "In CBO’s judgment, there is no compelling evidence that part-time employment has increased as a result of the ACA," it states.

This report isn't good news for President Obama, and it's not good news for the economy. But be wary of overblown claims about what it means—Obamacare might be driving down employment, but the decrease is because American workers have reasons to stay home, not because their bosses have decided to cut them loose.