Confusion over New CBO Findings on Obamacare and Employment

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Paul Ryan, Chairman of the House Budget Committee, questions CBO Director Douglas Elmendorf over Feb. 4 CBO report.
Source: Calvin Woodward, “Analysis: Obamacare Jobs Report Not as Dire as GOP Claims,” clarionledger.com

On Feb. 4, 2014 the Congressional Budget Office (CBO) released a report entitled “The Budget and Economic Outlook: 2014 to 2024.”  The purpose of the report, according to the CBO, was to provide “baseline projections of what federal spending, revenues, and deficits would look like over the next 10 years if current laws governing federal taxes and spending generally remained unchanged.” Included within the report (p.130-133) was a section on how the Patient Protection and Affordable Care Act (PPACA), also known as Obamacare, is projected to affect employment.

Shortly after release of the CBO report, US House Majority Leader Eric Cantor (R-VA) stated that, “The CBO’s latest report confirms what Republicans have been saying for years now. Under Obamacare, millions of hardworking Americans will lose their jobs and those who keep them will see their hours and wages reduced.”

A Feb. 4, 2014 article published in Forbes stated that the “CBO very clearly states that Obamacare… will reduce employment by as much as 2.5 million jobs over the next ten years.”  However, in the Los Angeles Times coverage of the report, they state that “the CBO projects that the act will reduce the supply of labor, not the availability of jobs.”

According to the text of the CBO report itself, Obamacare will cause “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… 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.”

Many workers who would otherwise work less or quit their jobs continue to work full-time solely to receive health insurance from their employers, a condition known as “job lock.” Obamacare could allow these workers to obtain their own insurance and release them from their dependency on employer-based health insurance. According to US Senate Majority Leader Harry Reid (D-NV) “we have the CBO report, which rightfully says, that people shouldn’t have job lock… we live in a country where there should be free agency… the Republicans talk about losing millions of jobs simply isn’t true. It [Obamacare] allows people to get out of a job they’re locked into.”

According to an earlier July 2013 study on job lock published by the National Bureau of Economic Research (NEBR), expanded access to Medicaid and heavily subsidized health insurance for low income individuals under Obamacare could lead to an employment decline of up to 940,000 individuals – a slightly lower number than was estimated by the CBO.

Sources:

Congressional Budget Office (CBO), “The Budget and Economic Outlook: 2014 to 2024,” cbo.gov, Feb. 4, 2014

Robert Farley, “The ACA: Losing Jobs vs. Choosing Not to Work,” factcheck.org, Feb. 4, 2014

Craig Garthwaite, Tal Gross, and Matthew J. Notowidigdo, “Public Health Insurance, Labor Supply, and Employment Lock,” nebr.org, July 2013

Scott Gottlieb, “CBO: Obamacare Is a Tax on Work, May Cut Full-Time Workforce by 2.5 Million,” Forbes, Feb. 4, 2014

Michale Hiltzik, “Why the New Report on Obamacare Is Good News,” Los Angeles Times, Feb. 4, 2014

Bridget Johnson, “Reid: Obamacare Doesn’t Cost Jobs, It Turns Workers Into ‘Free Agents,'” pjmedia.com, Feb. 4, 2014