Chicken Little and the CBO Report

March 3, 2014

Are the sky and the number of available jobs really falling?

Not surprisingly, commentators on both sides of the aisle had a lot to say about the recently released report on the economy from the Congressional Budget Office (CBO).

While the report had some good news — for example, under current laws the federal deficit is projected to drop from $1.4 trillion in 2009 to $514 billion by the end of the 2014 fiscal year — another section of the report was less positive. It concluded that a 1.5 to 2% reduction in the number of hours worked in the economy will result in approximately 2 million less full time workers.

The reason for the reduction in the number of hours worked? A provision of the Affordable Care Act requiring employers to offer health insurance to any worker logging more than 30 hours a week. [Update: This provision, also known as the “employer mandate,” has been delayed for a year.]

In response to the fallout from the report, Council of Economic Advisors chairman Jason Furman, pointed back to the data, saying “It puts to rest… some of the more overwrought arguments about how the sky would fall.”

There are several contentious topics within this argument. Here they are and here’s who is taking what position on them.

Topic 1: Are people “losing their jobs” or “choosing to work less”?

Position 1: Said House Majority Leader Eric Cantor, “Under Obamacare, millions of hardworking Americans will lose their jobs and those who keep them will see their hours and wages reduced.”

Position 2: According to the CBO report, the decline in work will be “almost entirely because workers will choose to supply less labor” [emphasis added]. Without the need to stay at a full-time position to retain health benefits, overworked families can work less and still get health benefits, or individuals can go part-time in order to go back to school, leave a job in order to start a business, or look for other, more fulfilling work, without losing coverage.

Topic 2: With a full time job no longer necessary to receive health insurance, will unemployed Americans “not be motivated to hunt for jobs” or “will they voluntarily reduce their hours to pursue education, alternative careers, or elder care”?

Position 1: A writer from the Daily Beast suggested that eliminating the need for full time employment to receive health care coverage will have the unintended consequence of enabling the perennially unemployed and the 30+ year old parents’ basement dwellers to not pursue full time work.

Position 2: White House Spokesman Jay Carney explained that “because of this law, individuals will be empowered to make choices about their own lives and livelihoods, like retiring on time rather than working into their elderly years or choosing to spend more time with their families.”

Topic 3: Is the employer mandate causing employers to reduce hours for workers so they don’t have to provide coverage for their employees?

Position 1: Some have speculated that another reason for a decline in jobs would be that employers — now required to provide insurance to their full-time employees — would reduce employee hours to make them part-time, thereby freeing themselves from the requirement to cover them. Recent reports indicate that some employers (at least in the public sector) are using this tactic, though it is difficult to say if the practice is widespread.

Position 2: According to a statement made by White House Press Secretary Jay Carney, “CBO’s findings are not driven by an assumption that ACA will lead employers to eliminate jobs or reduce hours, in fact, the report itself says that there is ‘no compelling evidence that part-time employment has increased as a result of the ACA.'”

Conclusion

There are several takeaways here. One is that one benefit to workers putting in less hours or leaving jobs they don’t like is an increase in satisfaction, which may lead to less sick days and reduce feelings of “job lock.” Another is that the vacuum left by these workers can also be filled by the unemployed or others potentially better suited for the positions vacated.

According to a piece in Politico, we can also expect more money (from subsidies) to create more demand for services among low and middle income families, as not all money will be going towards health insurance costs. This freeing up of income, they argue, ultimately stimulates economy, leading to more jobs.

Simply put, consensus is that the ACA may shrink the total number of full time jobs temporarily, but in the long term it has the potential to be responsible for greater job satisfaction among workers.

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