Since the implementation of the Affordable Care Act (ACA), also known as ObamaCare, many Americans have had numerous questions and concerns. Perhaps one of the most often repeated questions regards how ObamaCare will affect the US economy. Not only are Americans are concerned about the up-front costs associated with ObamaCare, but they are also concerned about how it will affect the labor force and job market.

Often, when business expenses increase, businesses may attempt to save money by eliminating jobs or slowing hiring plans. This may occur when rising expenses are related to workforce concerns, such as increases in employee health care costs. However, not everyone agrees that this is the outcome. Some individuals argue that businesses can find other ways to save money, and that taking less profit should also be a viable business option. In addition, many have argued that the ObamaCare requirement that large businesses offer employees health insurance or pay a penalty should not greatly increase expenses for businesses, since most companies already provide health care for employees.

Recent History of the US Job Market

Prior to the passage of the ACA, the U.S. economy and job market were troubled. The recession of 2007-2009 resulted in massive job losses across a variety of industries. The economy still hasn’t recovered – in January of 2014 there were still 16.5 million available workers in the United States and a nationwide unemployment rate of 6.7%. When adjusted for inflation, wages had also stagnated since 2011.

In addition, the most recent increase in the minimum wage took effect in 2009. This meant that the real cost of hiring lower-income workers (those at or near the minimum wage) increased. The result is that lower-paying industries reduced their hiring. This dramatically impacted those who are either unqualified or unable to find employment in higher paying jobs.

The Impact of the ACA on Employment

Many critics contended that ObamaCare is not helping the American job market, arguing that businesses would have incentive to cut employee hours below 30 per week to avoid the health care mandate. The White House dismissed these concerns, but the Bureau of Labor and Statistics (BLS) showed that workweek hours in lower-earning jobs sank to an all-time low in July of 2013, before the Obama administration announced a delay in the employer mandate.

Additionally, the Congressional Budget Office (CBO) released a report in early February of 2014. Among the rest of the economic and job analysis, one sentence stood out. When discussing the ACA, the report states: “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, almost entirely because workers will choose to supply less labor.”

Essentially, the CBO states that ObamaCare will encourage Americans to work less, in favor of earning less and thus receiving additional financial assistance with health insurance and other benefits. This has been an argument against government benefits in general for many years – that offering subsidized benefits for low- to middle-income families may encourage less work in order to reduce income and qualify for the benefit.

Opponents of the ACA have seized upon this prediction to continue to make the argument that ObamaCare will have a negative impact on the economy and job market. They point out the increased cost that higher subsidies will bring as more and more Americans choose to work less. Those who favor the law point out that health insurance gives individuals an opportunity to switch jobs or start businesses of their own without the worry of finding affordable health insurance. They claim, rather, that the subsidies put money in Americans’ pockets, which helps increase the demand for more goods and services and creates a positive impact on the US job landscape.

As time goes by, the actual effects of the ACA on job creation, hours worked, and the economic picture will become clearer. Each government report, prediction, and economic study will provide additional data and points of discussion. Until the results are clear, however, those who oppose the ACA and those who support it will likely continue to draw very different conclusions from the same sets of information.

 

Sources:

http://www.bloomberg.com/news/2014-01-21/wage-gains-elusive-even-as-u-s-job-market-rebounds-economy.html

http://news.investors.com/politics-obamacare/020314-669013-obamacare-employer-mandate-a-list-of-cuts-to-work-hours-jobs.htm

http://www.cbo.gov/publication/45010

http://www.washingtonpost.com/business/economy/cbo-botched-health-care-law-rollout-will-reduce-signups-by-1-million-people/2014/02/04/c78577d0-8dac-11e3-98ab-fe5228217bd1_story.html