The new health law and jobs

Host Mary Walden asks about the non-partisan Congressional Budget Office, which has the task of analyzing the economic impacts of federal programs, and recently issued a report, saying that the new healthcare law — the Affordable Care Act — could actually lead to fewer jobs in the economy. Needless to say this report has been debated and analyzed ever since its release. She asks her husband, N.C. State University economist Mike Walden, to help us understand this report.

Mike Walden: “Well, first of all, Mary, to be clear, the report did not say that we’re going to have less jobs in the future. What the report did say is that because of the Affordable Care Act, we might have about 2 to 2.5 million fewer jobs than we would have had without the Affordable Care Act over the next decade.  And actually this is a very small percentage of all jobs when you look at the 140 million jobs in the country, and we’re growing.

“A couple of reasons why the report came to this conclusion: One has to do with the tax side of the Affordable Care Act. The Affordable Care Act is imposing some taxes primarily on higher income earners to afford the subsidies that it’s paying folks to help them afford health insurance. And as with any tax, when you increase the tax on labor and work, you’re going to reduce the motivation for people to work to some degree. And this is an old economic conclusion.

“So, what the Affordable Care Act did is use some of the research and literature on this to conclude how many fewer hours might be worked because of these higher taxes.  Again, nothing earth shaking here — it’s standard economic analysis. Perhaps the part of the report that got a little more attention was for those folks who are going to receive subsidies to help them buy health insurance under the Affordable Care Act. What the report suggested here is that because folks are receiving subsidies, they will not necessarily have to work as much to achieve the kind of standard of living they want.  They may choose, for example, to spend more time with their children, and this will actually reduce work effort to some degree by folks at that end of the income scale.

“And again that translated into their numbers. So, I don’t think these conclusions are earth shaking to an economist who has known about these relationships for a long time, but obviously when it hits the headlines, it has made news.”