Study: Obamacare Will Reduce Employment By ‘At Least 3 Percent’
Employment disincentives contained in Obamacare will likely reduce the nationwide weekly employment rate by at least 3 percent, according to a study released by the Mercatus Center on Tuesday.
The study, authored by University of Chicago economics professor Casey Mulligan, examines the potential consequences of several explicit and implicit Obamacare tax increases on weekly work hours and overall employment. (RELATED: Insurance Brokers: Obamacare is Harder Work for Lower Pay)
“Three major provisions of the [Affordable Care Act] introduce incentives to change the workweek,” Mulligan says, the most obvious of which is “the explicit penalty on assessable large employers that do not offer health insurance to their full-time employees.”
Under Obamacare, full-time employees are defined as those who work at least 30 hours per week, and assessable employers are those with at least 50 full-time-equivalent employees.
The rationale behind this provision is that while the government provides subsidies through the Obamacare exchanges for individuals without employer-provided health insurance, “in effect, it claims them back by penalizing the employers.”
“Naturally,” Mulligan says. “A penalty on full-time employment can be expected to lead to less full-time employment.” (RELATED: CBO Triples Estimate of Obamacare Workforce Cuts to 2.3 Million)
The second provision likely to affect employment is that, “full-time employees and their families cannot receive subsidized health coverage,” on the Obamacare exchanges. “Unless their employer fails to offer affordable coverage.” According to Mulligan, this amounts to “an implicit tax on full-time employment.”
“In other words,” Mulligan explains. “Employees of an employer that offers insurance coverage will only receive a government subsidy if they work part time or spend time off the payroll entirely.”
Moreover, “because the value of the subsidies that the worker can lose by working full time may be greater than the amount of the penalty that the employer can receive for employing him,” the net benefit of full-time employment, relative to part-time employment, is reduced for both parties. (RELATED: University Reducing Student Work Hours Thanks to Obamacare)
The third major ACA provision affecting workweek incentives is one “that gives lower subsidies to families with higher incomes.”
This provision works on a sliding scale, so “a household participating in the exchanges will find that earning additional income will not only add to its federal and state income-tax liabilities, but will also decrease the subsidy it receives for its health insurance.”
“Like any additional marginal earnings tax,” Mulligan says. “This implicit tax can reduce hours worked.”
Mulligan goes on to identify “four different ACA ‘tax scenarios’ for U.S. workers,” based on whether and how the Obamacare incentives will affect them, and calculates “the share of the workforce that faces each of these scenarios.”
According to Mulligan, about 46 percent of the workforce will be negatively affected by the incentives, with the average worker experiencing a penalty equivalent to between 4 and 5.5 hours per week of full-time work. The remaining 54 percent of workers “do not face any of the ACA’s major new disincentives to work or earn.”
Mulligan applies “lessons from labor market history” to estimate how these penalties will affect labor market behavior, and predicts that, “the ACA will reduce employment and aggregate hours by slightly more than 3 percent, or about 4 million full-time-equivalent workers.” (RELATED: Dem Defends Obamacare Disincentivizing Work [VIDEO])
Some workers, he says, will reduce their weekly work hours to get below the 30-hour threshold, while others will actually “work slightly more hours per week,” but for fewer weeks per year.
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