Health care law winds up discouraging work, upward mobility. Economist’s study is damning
10/16/14 The Oklahoman Editorial Board: Health care law winds up discouraging work, upward mobility. Economist’s study is damning
BACKERS of Obamacare sometimes claim that increasing insurance coverage will make it easier for many citizens to achieve the American dream. Yet research by economist Casey B. Mulligan finds that Obamacare’s perverse incentives will effectively trap many people in part-time jobs and impede upward mobility.
In a paper done for the Mercatus Center at George Mason University, Mulligan studied how Obamacare’s taxes — both explicit and implicit — will affect workers. His conclusion: The so-called Affordable Care Act will ultimately reduce weekly employment per person by about 3 percent. That translates into roughly 4 million fewer full-time-equivalent workers.
Mulligan notes that three major provisions of Obamacare “introduce incentives to change the workweek” with two provisions particularly influencing workers’ behavior. One of those provisions makes employees ineligible for government insurance subsidies if a business offers coverage to full-time workers. “This is, in effect, an implicit tax on full-time employment,” Mulligan writes. “The forgone subsidies include cost-sharing assistance — federal dollars that reduce a family’s health insurance deductibles and copayments — as well as premium assistance administered through the federal personal income tax. Altogether, these subsidies can easily be worth more than $10,000 per year.”
The other Obamacare provision affecting workers’ behavior reduces subsidies as income increases. As a result, a worker earning additional income will not only face increased federal and state income tax liabilities, but also the loss of insurance subsidies. “Like any additional marginal earnings tax, this implicit tax can reduce hours worked,” Mulligan notes.
To illustrate his point, Mulligan compares two scenarios. In one, a worker has a full-time job (40 hours per week). In the other, he has a part-time job (29 hours). Based on gross compensation — $52,000 versus $37,700 — one would assume the full-time job would be preferable. But after accounting for the loss of Obamacare subsidies, the impact of other non-Obamacare taxes, and deducting traditional employment expenses (such as commuting and child care), Mulligan notes the wage difference disappears. In fact, the part-time job could provide the worker slightly more money overall — $28,854 versus $27,021.
For millions of workers, Mulligan writes, “a part-time schedule can yield more disposable income than a full-time schedule …” The individuals most likely to fall into that category are low-wage employees who worked 30 to 40 hours per week before Obamacare, a group that may include 32.9 million people, or roughly 20 percent of the potential workforce. Mulligan estimates that members of this group must, on average, work an additional 5.5 hours per week to make up for the subsidies lost upon working full time.
In response to Obamacare’s incentives, Mulligan estimates about 3.6 percentage points more of the workforce will reduce their work hours to between 26 and 29 hours per week than what would occur if Obamacare wasn’t the law. This group will be disproportionately female because women represent a greater percentage of those currently working 30 to 35 hours.
Obamacare’s perverse incentives are a major reason why Walmart recently dropped insurance coverage for some part-timers (as have Target, Home Depot and Trader Joe’s). For many low-income workers, health insurance is being provided in exchange for forgoing the dream of a better life through employment opportunities. Thus, Obamacare isn’t just wrecking health care. It’s also rearranging society and the workplace in ways that harm millions of Americans.
