ACA Could Cut Number of Full-Time Workers by 2.5M, Analysis Says
The Affordable Care Act will reduce the number of full-time workers by about 2.5 million over the next decade, largely because it provides incentives for people to choose to work fewer hours, according to the Congressional Budget Office's annual budget outlook report, the New York Times reports.
The CBO report, released Tuesday, is part of a regular update to its budget projections (Lowrey/Weisman, New York Times, 2/4). The revised estimates are based on a closer examination of the ACA, including provisions affecting the labor market, and additional findings and studies of the law conducted since 2010 (Zigmond, Modern Healthcare, 2/4).
Effect on Hours
Specifically, the law's coverage expansion will make working fewer hours a more attractive option to those who previously worked full time to qualify for employer-based health insurance (New York Times, 2/4).
Further, the law's subsidies to offset the cost of premiums also provide an incentive for workers to reduce their hours through both a "substitution effect," in which higher incomes mean lower subsidies, and an "income effect," in which the subsidies bolster household incomes allowing people to maintain their standard of living while working fewer hours.
Workers Bear the Cost
Meanwhile, the analysis also predicted that workers will bear the cost of penalties incurred by employers with 50 or more employees who fail to offer affordable coverage, through reduced pay or other forms of compensation (Modern Healthcare, 2/4).
The analysis also said the definition of full-time employee under the ACA -- those who work 30 or more hours per week -- will encourage employers to reduce workers' hours to avoid complying with the employer mandate. However, the demand for labor will remain unchanged, meaning businesses likely will rearrange workers' schedules to avoid the mandate, according to CBO.
Analysts noted that the law likely will have no immediate effect on part-time employment because the mandate does not take effect until 2015 (New York Times, 2/4).
Total Employment, Compensation To Rise
Overall, the report projected that total employment and compensation will rise over the next 10 years, while full-time employment will decline by about two million in 2017 and 2.3 million in 2021, nearly triple CBO's previous estimate of 800,000. CBO analysts also noted that overall the increase would be "smaller than it would have been in the absence of the ACA" (Modern Healthcare, 2/4).
Despite the findings, CBO concluded that there is little evidence showing that the ACA is affecting employment. It added that businesses are not expected to significantly cut back on workers or worker hours because of the law (Goldfarb/Goldstein, Washington Post, 2/4).
ACA Opponents: Report Shows Law Is Job Killer
ACA opponents were quick to use the report as evidence that the ACA is a job killer, the Times reports (New York Times, 2/4).
In a statement, House Speaker John Boehner (R-Ohio) said President Obama is "ignoring" the ACA's effect on the economy, adding, "The middle class is getting squeezed in this economy, and this CBO report confirms that Obamacare is making it worse. The report also confirms what the American people already know: further action is necessary to address the drivers of our debt."
White House Responds
Jason Furman, chair of the Council of Economic Advisors, touted the report's findings that the ACA provided workers with greater "choice" to scale back their hours or to leave their jobs to pursue other career goals. He said, "This is not businesses cutting back on jobs. This is people having new choices" (Sink, "Briefing Room," The Hill, 2/4).
White House press secretary Jay Carney said, "Claims that the Affordable Care Act hurts jobs are simply belied by the facts in the CBO report." He added, "CBO's findings are not driven by an assumption that ACA will lead employers to eliminate jobs or reduce hours, in fact, the report itself says that there is 'no compelling evidence that part-time employment has increased as a result of the ACA'" (Epstein, Politico, 2/4).This is part of the California Healthline Daily Edition, a summary of health policy coverage from major news organizations. Sign up for an email subscription.