Obamacare to Cut Work Hours by Equivalent of Two Million Jobs

CBO report shows that health law is a job killer

February 4, 2014

WASHINGTON (Reuters) - President Barack Obama's healthcare law will reduce American workforce participation by the equivalent of 2 million full-time jobs in 2017, the Congressional Budget Office said on Tuesday in a report that could fuel Republican efforts to paint the law as a job killer.

In its latest U.S. fiscal outlook, the nonpartisan CBO said the health law would prompt some lower-income workers to limit their hours to avoid losing federal subsidies that are available under the law to help pay for health insurance.

The CBO said the biggest impact on work hours from the health law would begin in 2017 because major provisions of the law will be well under way by then. The CBO said there would be smaller declines in work hours that would occur before then.

Work hours would be reduced by the equivalent of 2.5 million jobs in 2024, the agency said.

Republicans have long argued that the Patient Protection and Affordable Care Act (ACA) is a job killer that would discourage employers from hiring full-time workers.

"The ACA also will exert conflicting pressures on the quantity of labor that employers demand, primarily during the next few years," the agency said.

But CBO said the expected drop in work hours between 2017 and 2024 would result largely from worker decisions not to participate in the labor force, rather than from higher unemployment or the inability of part-time workers to find full-time hours.

"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," CBO said.

According to the report, federal subsidies can be substantial, particularly for lower-wage workers who receive more under the law's sliding income scale. But that also means the benefits can be phased out as a worker's income rises.

"The phaseout effectively raises people's marginal tax rates (the tax rates applying to their last dollar of income), thus discouraging work," CBO said.

The agency also said that if higher taxes were required to pay for subsidies, the effect would also be to discourage work and create other economic distortions.

The CBO said the healthcare law is not expected to reach its initial goal of enrolling 7 million uninsured Americans in health insurance this year, due to its botched rollout.

In a fresh forecast for 2014, the CBO estimated that only 6 million people would sign up for private coverage through new health insurance marketplaces. Technical problems that largely paralyzed the website after its initial rollout discouraged many Americans from enrolling.

(Editing by Matthew Lewis)

Published under: Obamacare