- (Photo: REUTERS/Lucy Nicholson)
There will be about two million fewer American workers by 2017 because of the Affordable Care Act, or "Obamacare," a Congressional Budget Office report released Tuesday finds.
Overall, employment is expected to increase, though not as much as it would if the ACA had never become law. The job losses will increase to 2.5 million by 2021.
The estimate is for full-time employment, the report notes. Some of the losses will lead to unemployment while some of the losses will translate to part-time employment.
The reduction, CBO believes, will be caused by disincentives to work that are in the law.
"CBO estimates that the ACA will reduce the total number of hours worked, on net, by about 1.5 percent to 2.0 percent during the period from 2017 to 2024, almost entirely because workers will choose to supply less labor – given the new taxes and other incentives they will face and the financial benefits some will receive," the report states.
A 2010 report had estimated there would only be about 800,000 job losses by 2021. The revised estimate is based upon the incorporation of additional data and new research into the CBO's analysis.
"There are several reasons for that difference," the report says. "CBO has now incorporated into its analysis additional channels through which the ACA will affect labor supply, reviewed new research about those effects, and revised upward its estimates of the responsiveness of labor supply to changes in tax rates."
The ACA provisions that will have the biggest impact on employment, CBO believes, are (in order of importance): the subsidies to purchase health insurance on the exchanges, the expansion of Medicaid eligibility, the penalties placed on employers who choose not to provide coverage, and the payroll tax increases on those making more than $200,000 (or $250,000 for families).
The subsidies will create disincentives to work, the report says, because as income rises the subsidy decreases, or could go away entirely.
Because of the subsidy, the report says, "some people will choose not to work or will work less – thus substituting other activities for work. The income effect arises because subsidies increase available resources – similar to giving people greater income – thereby allowing some people to maintain the same standard of living while working less."
The White House took issue with the report's findings. The fact that there have been job gains since the ACA began to be implemented, the White House said, proves that the ACA will not cause job losses.
"While many factors affect job growth, the actual performance of businesses refutes those who predicted that the Affordable Care Act would dramatically hurt the economy," the White House statement read.
At the same time, the White House agreed with and praised the report's findings that some would leave the labor force or work less due to the ACA.
"Over the longer run," the statement continues, "CBO finds 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. At the beginning of this year, we noted that as part of this new day in health care, 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. This CBO report bears that out, and the Republican plan to repeal the ACA would strip those hard-working Americans of that opportunity."
The CBO was created by Congress to provide nonpartisan analysis of the economy and federal budget. The ACA analysis appears in Appendix C of a report on the long-term budget and economic outlook.
The report also estimates that the national debt as a percentage of the GDP will decline slightly to 72 percent by 2017, but then rise sharply to 79 percent by 2024, because federal spending is expected to grow faster than the economy.
Government spending on Social Security and health care (Medicare, Medicaid, Children's Health Insurance Program, and the ACA subsidies) is expected to increase from 9.7 percent of GDP this year to 11.7 percent by 2024. Besides the interest on the debt, all other federal government spending, such as for defense, education and other social welfare programs, is expected to decrease from 9.4 percent of GDP this year to 7.3 percent by 2024.