Wednesday, February 5, 2014

2.5 million Less Full-time Jobs by 2024 (maybe), CBO Report

Last Update: New York Times editorial board:

Republicans immediately tried to brand the findings as “devastating” and stark evidence of President Obama’s health care reform as a failure and a job killer. It is no such thing. ... The report clearly stated that health reform would not produce an increase in unemployment (workers unable to find jobs) or underemployment (part-time workers who would prefer to work more hours per week). It also found “no compelling evidence” that, as of now, part-time employment has increased as a result of the reform law, a frequent claim of critics.

First Update: From the Washington Post: "Some people might decide to work part-time, not full time, in order to keep getting health-care subsidies. Thus, they are reducing their supply of labor to the market. Other people near retirement age might decide they no longer need to hold onto their job just because it provides health insurance, and they also leave the work force." Scroll down to "The Facts" in the Washington Post article --- it explains everything very well. (But some in the media, like Fox News, will most likely keep reporting that Obamacare is a "job killer" and will want it repealed so that the billionaires won't have to pay the 3.8% surtax on capital gains to expand Medicaid.)

In short, the Congressional Budget Office predicts that over the next 10 years, because of Obamacare, there will be 2.5 million less full-time jobs by 2024 (less than there otherwise might have been) because:
  1. employers will hire more part-time workers to avoid paying for healthcare;
  2. and because some workers will prefer to work part-time to get the healthcare subsidies (as if workers had all that much to say about how many hours they can work).

Here is just the portion of the CBO's labor force projections. (Full report in PDF)

I just heard on MSNBC this morning that because if Obamacare, 2 million people will either quit their jobs or quit their hours. The media pundits were referring to (and misinterpreting) a new Congressional Budget Office report. Some in the media are claiming that because of Obamacare, the labor force will decline by 2.5 million.

The Huffington Post, in defense of Obamacare, posts an article titled: Obamacare Isn't Killing Jobs -- It Gives Workers A Choice:

Because of Obamacare, the national labor force could shrink by the equivalent of 2.5 million full-time workers, according to a Congressional Budget Office report.

This is the typical media slant --- and for the most part, it is not true at all. If it's more beneficial to hire full-time employee (such as in manufacturing, to keep interruptions in production lines to a minimum) or to hire temp workers (to work in low-paying jobs that don't require advanced training), or to hire part-time workers (when businesses only require extra help during peak hours, such as in the food and beverage or retail industry), then employers will hire accordingly.

When can, employers have always hired part-time workers (long before there was ObamaCare™) to avoid paying benefits, such as paid vacations, sick days, holiday pay or healthcare insurance—or other fringe benefits that may be required in a union house—by using the Disposable Employee Model.

Here's what the CBO report actually says:

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. Because the largest declines in labor supply will probably occur among lower-wage workers, the reduction in aggregate compensation (wages, salaries, and fringe benefits) and the impact on the overall economy will be proportionally smaller than the reduction in hours worked. Specifically, CBO estimates that the ACA will cause a reduction of roughly 1 percent in aggregate labor compensation over the 2017–2024 period, compared with what it would have been otherwise ... The reduction in CBO’s projections of hours worked represents a decline in the number of full-time equivalent workers of about 2.0 million in 2017, rising to about 2.5 million in 2024.

Editor's Note: Is this a choice of the employees, or the employers? This is the GOP's recently proposed bill: The Save American workers Act (all of 2 pages long, not counting the congressional credits), and it says: "To amend the Internal Revenue Code of 1986 to repeal the 30-hour threshold for classification as a full-time employee for purposes of the employer mandate in the Patient Protection and Affordable Care Act and replace it with 40 hours. [Now back to the CBO report].

Although CBO projects that total employment (and compensation) will increase over the coming decade, that increase will be smaller than it would have been in the absence of the ACA. The decline in full-time-equivalent employment stemming from the ACA will consist of some people not being employed at all and other people working fewer hours; however, CBO has not tried to quantify those two components of the overall effect. 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, so it will appear almost entirely as a reduction in labor force participation and in hours worked relative to what would have occurred otherwise rather than as an increase in unemployment (that is, more workers seeking but not finding jobs) or underemployment (such as part-time workers who would prefer to work more hours per week).

For one thing, the labor force has been in decline since 2000. Also, the Bureau of Labor Statistics, economists and the Federal Reserve have not only predicted a declining labor force years (long before ObamaCare™ was even a bill, because there aren't enough jobs) — but they also predicted a further decline in the labor force well into 2022.

And since when do workers dictate to the boss how many hours they want to work? People either apply for and/or reject either a part-time job, a full-time job, a temporary job or an "on call" job (working when the employer needs you, with no guarantee as to the number of hours or any particular work schedule).

The Congressional Budget Office is supposed to be "nonpartisan" but cites very partisan economists in their recent 182-page study projecting the deficit and economic outlook for the next 10 years.

(Page 126 of the CBO report) "One line of research indicates that the subsidies will affect the labor supply of many full-time workers with health insurance from their employer—precisely because they effectively forgo exchange subsidies when they take or keep a job with health insurance.5 If instead a worker switched to a part-time job, which typically does not offer health insurance, that worker could become eligible for exchange subsidies. In that view, exchange subsidies effectively constitute a tax on labor supply for a broad range of workers."

5. See Casey B. Mulligan, Average Marginal Tax Rates Under the Affordable Care Act, Working Paper 19365 (National Bureau of Economic Research, August 2013), , and Is the Affordable Care Act Different From Romneycare? A Labor Economics Perspective, Working Paper 19366 (National Bureau of Economic Research, August 2013),

Editor's Note: Casey B. Mulligan's bio is at the Cato Institute, an American libertarian think tank that was founded as the Charles Koch Foundation. Casey B. Mulligan has been trying to convince the undecided that ObamaCare has destroyed the American work ethic. But he's really been advocating for those who now have to pay a 3.8% surtax on their investment income (capital gains) earned from their stocks and stock-option grants, real estate, and SWAG investments to fund the expansion of Medicaid (through Obamacare) for the poor.

Where I have also noted Casey B. Mulligan -- More Part-Time Jobs in 2014?

Part-time employees (working less than 30 hours or four days a week) are exempt for the purposes of determining the penalty [for Obamacare].

Because of this, some people [Casey B. Mulligan] believe that the ratio of part-time jobs to full-time jobs will increase in 2014 if the healthcare mandate goes ahead as planned, and so they expect average weekly hours to dip further down with an increase of part-time workers in the labor force.

Some libertarian economists [ Casey B. Mulligan] look at this scenario and seem to imply that this is an "incentive" for people to only work part-time, because if they aren't earning enough, they'll be better compensated by the lack of a penalty and by obtaining free (or government subsidized) healthcare.

But in the current job market (or any job market, for the matter), most people don't dictate to their employers what hours they want to work --- the boss decides, not the workers.

Where I have also noted Casey B. Mulligan -- Obamacare does NOT create part-time jobs:

In the New York Times Casey B. Mulligan writes, "The Affordable Care Act’s employer mandate will eventually levy a penalty on large employers that do not offer affordable health insurance to their full-time employees. Employers have been complaining about the penalty, saying it will reduce the number of people they hire and cause them to reduce employee hours."

And then in another article by Casey B. Mulligan he writes, "Because part-time workers will be eligible for the subsidies, except in the rare instances in which their employer covers them, full-time work will no longer carry the advantage of access to health insurance. That by itself will encourage more people to seek part-time work.

Where I have also noted Casey B. Mulligan -- High School Drop-Out Debunks Economics Professor:

Casey B. Mulligan, with a Ph.D. in Economics, wrote an opinion piece for the New York Times making his very flawed case for not renewing federal extended unemployment benefits next year (thereby immediately denying 1.3 million Americans of any income at all).

He gives us two very laughable reasons why: 1) because ObamaCare® kicks in and will pay people more (by using government subsidies) than unemployment benefits would, and 2) unemployment benefits keep people from finding jobs (Read the notable excerpts from his Libertarian/Ayn Rand propaganda piece).

Notable excerpts from the Huffington Post article:

The nonpartisan [NOT] CBO estimates that the Affordable Care Act will reduce Americans’ incentive to have a job or work more hours for two reasons. First, the health reform law offers subsidies to low-income Americans that decline as their income goes up. It also offers expanded access to Medicaid benefits for the poorest workers, which is similarly tied to income. That means that for some people, it may make sense to earn less money through work so they can get a bigger break when buying health insurance. In other words, some workers will decide that having subsidized health coverage is more valuable to them than having more money to spend on goods and services.

Second, for some Americans the subsidies will essentially function as an increase in income because they won't be paying as much for their health care, allowing them to work less and still maintain the same standard of living.

Most full-time workers will probably decide that it doesn't make sense to reduce their own hours or leave their jobs to qualify for coverage, according to the CBO. The people most likely to make that choice are low-wage workers, who either don't get company health benefits or are making so little that they would be close to qualifying for Medicaid or the subsidies.

Still, the structure of the Obamacare subsidies makes it less likely that workers would make that choice at all, according to Elise Gould, the director of health policy research at the left-leaning Economic Policy Institute.

An extra $100 in income doesn’t directly translate into $100 less in subsidies, meaning that for many low-income workers, there would probably be more of an incentive to make more money than to get the government breaks.

In addition, the CBO analysts acknowledge that their "estimate of the ACA's impact on labor markets is subject to substantial uncertainty."

One reason for the uncertainty is simply that the changes that will result from the health care law are going to take place on an unprecedented scale. Another reason is that there are a variety of ways Obamacare could affect workers: Some provisions may incentivize Americans to work more and some could push them to work less, resulting in the net loss of labor supply over a decade.

As the White House noted in a statement Tuesday, the people most likely to reduce their hours or stop working are those who have a job mainly to get affordable health coverage -- people like second wage earners in a household, potential entrepreneurs or workers close to retirement.

Obamacare will also affect the other side of the equation -- that is, businesses' demand for workers -- but it's unclear exactly how, because the law's provisions have the potential to both incentivize and decentivize employers to hire, according to the CBO. The law will require companies with at least 50 full-time workers to offer health benefits to anyone who works more than 30 hours per week starting next year. That may in turn give employers a reason to hire fewer people or more part-time workers to keep their labor costs down, the report says.

* The CBO reports suggests that in addition to the 19.1 million Americans who currently and voluntarily work part-time (for non-economic reasons) within the next 10 years there may be an additional 2.5 million more—because then they might choose to work part-time to be eligible for government subsidized healthcare (for economic reasons) adding to the 7.9 million who currently work part-time for economic reasons.

Questions: How many workers can choose to go from working full-time to part-time-time in their current job; and if not, how may will quit their current full-time job and then seek out a part-time job to be eligible for government subsidized healthcare? And what if they can not find a part-time job, will they quit their full-time job to get healthcare, foregoing other expenses like rent, car payments and utilities?

BLS: December 2013 - Persons at work part-time 


Part time for economic reasons(3)

7.9 million

Part time for non-economic reasons(4)

19.1 million

(3) Refers to those who worked 1 to 34 hours during the reference week for an economic reason such as slack work or unfavorable business conditions, inability to find full-time work, or seasonal declines in demand (such as those in retail during the holidays).
(4) Refers to persons who usually work part time for non-economic reasons (This excludes persons who usually work full time but worked only 1 to 34 hours during the reference week for reasons such as vacations, holidays, illness, and bad weather.)


  1. Why the CBO report is total BS is because the real reason is: There are not enough jobs now, nor will there be going forward. The US has offshored too many jobs (along with their multiplier effect). Just since 2000 alone, the US has lost 64,087 manufacturing establishments. Blaming Obamacare for less full-time jobs is BS --- if employers really needed full-time help, they would hire them --- regardless of whether they were union workers with healthcare benefits or non-union workers with Obamacare. The media pundits are all ignorant idiots! And they get paid!!!

    See my post here:

  2. A Lot Of Media Outlets Botched The CBO's Obamacare Report

  3. Final Update from Economist Jared Bernstein (nuff said):

    There’s a difference between workers (labor supply) and jobs (labor demand). The budget office bent over backward to make this distinction, claiming that employers’ demands for workers will not change much at all because of the health care law... There is thus no support in the Congressional Budget Office report for the claim that the health care act kills jobs. As the report put it, the estimated reduction in hours of work “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.”