Obamacare Will Cost More Than 2 Million Jobs, But Not for the Reason You Think

A study by the CBO shows that the equivalent of 2.5 million jobs will likely disappear within 10 years

Feb 8, 2014 at 2:18PM


A familiar refrain among those who oppose the Affordable Care Act, President Barack Obama's signature health reform law, is that its implementation will destroy jobs.

Last summer, many cited the fact that more part-time than full-time jobs were created in the first half of 2013 as evidence that employers were reducing their full-time work force in order to avoid the Obamacare mandate. The employer mandate requires employers with 50 or more workers to provide health insurance for employees who work 30 or more hours per week  – or face penalties.

A new report from the Congressional Budget Office seems to add weight to the argument that Obamacare is costing jobs. The report notes that the country will likely see a reduction in the number of full-time-equivalent jobs of around 2 million by 2017, and up to 2.5 million by 2024. The good news, however, is that these will be voluntary job reductions – and not the consequence of job destruction wrought by health care reform.

Three times the CBO's former estimate
The current CBO report notes that Obamacare will reduce the total FTE hours worked by 1.5% to 2% from 2017 to 2024, three to four times the 0.5% estimated impact the office had reported back in 2010. The authors explain that new information has been mixed into its analysis, including how workers will react to changes in tax rates.

It is the tax rate issue that is at the heart of the decrease in working hours, since health insurance is subsidized at lower levels of income. The CBO believes that the loss of subsidy that accompanies rising income will prompt many people to work less in order to keep income lower  – while simultaneously maintaining the same standard of living. Essentially, Obamacare will create a tax on labor income, according to the CBO.

Good, bad, or neutral?
While Speaker John Boehner has characterized the CBO's original estimate of decreased work hours as "destroy(ing) 800,000 American jobs", the decrease of 0.5% in FTE jobs was also a voluntary reduction. Likewise, the allegation that people were being forced into part-time positions in response to the employer mandate was actually disproved in a study by the Center for Economic and Policy Research. Workers mindfully reducing their working hours and people losing their positions due to job cuts are two very different things.

Another issue is whether the 2 million FTE jobs taken out of circulation over the next 10 years will be injurious to the economy – particularly with the CBO's projected continued deterioration of the nation's labor force participation rate.

As the CBO notes, the greatest reduction in FTE jobs will occur by 2017, after which time the situation will begin to moderate. In addition, there are definite job opportunities on the horizon in the health care field, as Obamacare begins to highlight job shortages in the health care delivery system.

At any rate, a dearth of available jobs compared to the number of people who want them is nothing new. The Bureau of Labor Statistics reports that there were 4 million job openings at the end of December – while the number of unemployed stood well over 10 million. Addressing this problem, as well as the issue that nearly 4 million persons number among the long-term unemployed, would go a long way toward creating a more robust economy that could easily withstand the loss of working hours that may develop in the years ahead.

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