Will Obamacare Really Kill 2.5 Million Jobs?

A new federal report notes a large drop in full-time workers, but with plenty of caveats.

Anti-Obamacare protesters wear masks of U.S. President Barack Obama and Grim Reaper as they demonstrate in front of the U.S. Supreme Court June 28, 2012 in Washington, D.C.
National Journal
Catherine Hollander
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Catherine Hollander
Feb. 4, 2014, 11 a.m.

The Af­ford­able Care Act could re­duce the num­ber of full-time work­ers in the United States by 2 mil­lion in 2017 and 2.5 mil­lion in 2024, ac­cord­ing to a new re­port from the Con­gres­sion­al Budget Of­fice.

Con­gres­sion­al Re­pub­lic­ans pounced on the re­port as proof that Obama­care is every bit the “job-killer” they prom­ised it would be. But it’s not that simple.

The re­port says the re­duc­tion comes “al­most en­tirely” from a de­crease in the amount of time laborers choose to spend at work, rather than a sub­stan­tial de­cline in the amount of work busi­nesses are of­fer­ing.

The law’s in­cent­ives and sub­sidies may give some work­ers less of a reas­on to work. Un­der the Af­ford­able Care Act, in­di­vidu­als who earn up to 400 per­cent of the fed­er­al poverty level qual­i­fy for as­sist­ance to buy health in­sur­ance. Some may want to keep their hours down in or­der to qual­i­fy; oth­ers may see the sub­sid­ized cov­er­age as an op­por­tun­ity to re­duce their hours for oth­er reas­ons.

The es­tim­ate of the ef­fect of the law on the work­force, which was part of a reg­u­lar up­date of the non­par­tis­an CBO’s 10-year budget and eco­nom­ic out­look re­leased Tues­day, was a sig­ni­fic­ant de­par­ture from earli­er es­tim­ates. Pre­vi­ously, the CBO es­tim­ated that Obama­care would re­duce house­hold em­ploy­ment by 800,000 in 2021. Ac­cord­ing to the new re­port, em­ploy­ment would fall by 2.3 mil­lion that year. The re­port only covered the years 2014 to 2024, but the agency said the em­ploy­ment ef­fects would likely con­tin­ue after that time peri­od.

Caveats aside, the new fig­ures were fod­der for a fresh round of Re­pub­lic­an at­tacks on the health re­form law. Con­gres­sion­al Re­pub­lic­ans have sought to re­peal or al­ter the Af­ford­able Care Act since its pas­sage in 2010; among the cri­ti­cisms most fre­quently dir­ec­ted to­ward the law is that it will drive up costs for busi­nesses and hurt job cre­ation.

“The middle class is get­ting squeezed in this eco­nomy, and this CBO re­port con­firms that Obama­care is mak­ing it worse,” House Speak­er John Boehner, R-Ohio, said in a state­ment.

Sen. Or­rin Hatch, R-Utah, the rank­ing mem­ber of the Sen­ate Fin­ance Com­mit­tee, re­ferred to the re­port as “ter­rible news” in a sep­ar­ate state­ment. “A dir­ect threat to the long-term health and prosper­ity of our na­tion, this law must be re­pealed,” Hatch said.

Both CBO Dir­ect­or Douglas El­men­d­orf and the White House cau­tioned that the new fig­ures should be in­ter­preted care­fully. The White House fo­cused on the em­ploy­ee choice as­pect. “That is dif­fer­ent from say­ing … the em­ploy­er’s go­ing to des­troy a job be­cause of the Af­ford­able Care Act [and] now they can’t get it,” seni­or ad­min­is­tra­tion of­fi­cials said in a call with re­port­ers.

The full-time work­er fig­ure stems from the budget of­fice’s cal­cu­la­tion that Obama­care would re­duce the total num­ber of hours worked by 1.5 to 2.0 per­cent between 2017 and 2024, which is the equi­val­ent of 2 to 2.5 mil­lion full-time work­ers.

The num­bers changed sub­stan­tially, El­men­d­orf said Tues­day, be­cause the agency found new chan­nels, like the re­quire­ment for em­ploy­ers to provide cov­er­age for all full-time em­ploy­ees, through which the Af­ford­able Care Act would re­duce the labor sup­ply. The CBO also drew on new evid­ence of how changes in tax rates and Medi­caid ex­pan­sions and con­trac­tions have af­fected the labor sup­ply in the past.

The CBO’s es­tim­ates of the im­pact on the work­force are tied to how many people sign up for Obama­care un­der the newly cre­ated health in­sur­ance ex­changes. Right now, CBO es­tim­ates that 6 mil­lion people will sign up this year. If more sign up, then the im­pact of the law on em­ploy­ment will be great­er; if few­er people sign up, the ef­fect will be smal­ler. As with all of the CBO’s fore­casts, un­cer­tainty abounds.

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