The Independent Institute

 
        

Obamacare Crushes Working Class Job Opportunities



The Congressional Budget Office recently confirmed its estimate that Obamacare will shrink the workforce by 2 million full-time equivalent (FTE) jobs in 2025. When the CBO first published its (initially somewhat larger) estimate, in February 2014, it felt compelled to wriggle around the headline, claiming that it did not really mean what it said.

It is strictly true that some of this job loss will be “voluntary,” in that Obamacare’s subsidies will cause them to seek less work than otherwise. Those individuals will probably feel better off than if they had been laid off or fired. However, cutting back working hours because government subsidies encourage it is not the same as cutting back because you have changed your priorities – either economically or morally.

The new analysis allows us to see where the burden on employment lies – mostly on those eligible for tax credits in Obamacare’s exchanges. These are people who earn between 100 percent (or 138 percent, depending on the state) and 400 percent of the Federal Poverty Level. For a family of four this ranges from $24,250 to $97,000 in 2016.

The report actually estimates compensation will be 0.86 percent less in 2025 than it would without Obamacare, which it transforms into 2 million fewer FTE jobs. In other words, there would be about 232,560,000 jobs without Obamacare and 230,560,000 jobs with Obamacare.

That might not look like a big deal. However, the burden is mostly borne by a small population: those within the income range for Obamacare tax credits who do not have employer-based benefits. I estimate that about 85 percent of the approximately ten million enrolled in Obamacare exchanges in 2016 will be entitled to tax credits. That figure will grow a little by 2024 but not by much, as estimates of Obamacare enrollment are shrinking.

Fully half of Obamacare’s burden on employment (0.43 percent/0.86 percent) comes from the perverse structure of tax credits. So, one million FTE jobs lost is borne entirely by about 8.5 million of us. (See this Forbes column for my solution to this problem.)

The other one million FTE jobs lost due to other taxes (e.g. the so-called “Cadillac” excise tax on expensive employer-based health plans) and regulations are mostly distributed among the entire population. Yet, almost all corporate lobbying to “fix” Obamacare seeks to repeal these taxes and regulations, instead of removing the more harmful disincentives to work contained in Obamacare’s tax credits.

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For the pivotal alternative to Obamacare, please see Independent Institute’s book, A Better Choice: Healthcare Solutions for America, by John C. Goodman.

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