Between 2017 and 2024, the total number of hours worked by Americans will decrease by 1.5 to 2 percent because of the Affordable Care Act (ACA), the Congressional Budget Office (CBO) reports. This translates into a decline of 2.3 million full-time jobs. The CBO projection, released yesterday, Feb. 4, says the decline will be almost entirely due to employees choosing to work fewer hours or completely leaving the job market.
What does this mean for American families still struggling to recover from the Great Recession? Reactions to the CBO report are mixed. Supporters of the ACA characterize the law’s effect on the labor market as an indication that workers have more power over how they earn a living; those opposed to the law view it as an example of how government subsidies take away Americans’ initiative to work.
White House Press Secretary Jay Carney, in a Feb. 4 briefing, pointed to the report as evidence that the Affordable Care Act is empowering workers. Employees will no longer be chained to a job they don’t like in order to keep their health insurance.
“Americans would no longer be trapped in a job just to provide coverage for their families, and would have the opportunity to pursue their dreams,” said Carney. “This CBO report bears that out, and the Republican plan to repeal the ACA would strip those hard-working Americans of that opportunity.”
Wisconsin Representative Paul Ryan, Chair of the House Budget Committee, believes the CBO report confirms what ACA opponents have feared, that the health reform law is hurting American workers. In a Feb. 4 press statement, Ryan paints the report of a decline in full-time jobs as a negative and notes the projected decrease of jobs will largely strike lower-income employees.
The CBO gives several reasons why the ACA will have this effect on the labor market:
Subsidies for health insurance and Medicaid expansion
Tax credits and subsidies provided by the ACA for lower-income workers decrease as income rises. For some workers, this may be a disincentive to increase earnings. In states that have opted to expand Medicaid eligibility to 138 percent of the Federal Poverty Level, employees may choose to work fewer hours rather than lose Medicaid coverage.
Employers’ penalty for failure to provide health insurance benefits
Under the ACA, businesses with 50 or more full-time employees must provide affordable health insurance coverage to their employees or pay a penalty. The CBO projects that employers will pass this cost onto employees in the form of reduced compensation thereby reducing the amount of labor workers wish to supply.
Higher marginal tax rates
Workers earning more than $200,000 ($250,000 for married filing jointly) annually are assessed and additional .9 percent Medicare tax. Workers may choose to avoid this tax increase by earning less money.
Workers may opt for early retirement
With the availability of health insurance through the exchanges, along with subsidies, workers may elect to retire before they are eligible for Medicare coverage at age 65.