Obamacare: First Fruits for Workers?

The analysts and reporters who ploughed through the March jobs report came back with a mixed assessment of the economy. The 192,000 pace of job growth for the month was better than the prior two months when weather slowed growth, but the 178,000 three month average is certainly nothing to be happy about. At this pace the economy will not return to anything resembling full employment until 2020.

However there was some evidence in this report, along with prior months’ reports, that the Affordable Care Act (ACA) may be providing security to workers they did not previously have. By allowing people to get health insurance through the exchanges, workers no longer feel tied to their jobs. Due to the ACA, workers who have jobs they dislike can quit and look for a better job without worrying about losing insurance coverage.

The March jobs report provided some evidence that we are beginning to see the sort of labor market shifts from the ACA that would be expected. First, voluntary part-time employment in March increased by 230,000 to 18.9 million.

The key word here is “voluntary.” Opponents of the ACA have made a big point of claiming the employer sanctions in the law, which require that larger firms either provide insurance or pay a fine for every worker employed for more than 30 hours a week, will create a “part-time nation,” as firms cut workers’ hours to less 30 to avoid the penalty.

It seems unlikely that such hour cutting by employers will occur on a large-scale, but that is clearly not what is happening here. First, the sanctions won’t even go into effect until 2015, so there is no reason that employers would be reducing hours now because of the ACA. More importantly, the measure of voluntary part-time employment is telling us how many people have decided that they want to work fewer than 35 hours a week.

It is reasonable to think the number of people opting for part-time employment would increase under the ACA because many people were previously forced to work full-time in order to get health insurance through their job. Since the ACA allows people to get health insurance through the exchanges, many people will decide to work fewer hours. This is especially likely for parents of young children or workers with family members in poor health.

It is important not to make too much of the March number. The monthly numbers are always erratic, and most of the March gain was just reversing a decline reported for February. Still, this was the highest level of voluntary part-time employment since before the collapse of Lehman.

The other development in the labor market that may be attributable to the ACA was a decline in the number of older workers in the labor force. The ACA could be a factor here, since many older workers, especially those with health conditions, were working to get health insurance. Now that these workers will be able to get insurance through the exchanges, they will be able retire early.

This recovery had been unusual in the extent to which older workers accounted for the vast majority of the employment growth. Older workers were staying in the labor force longer than they had previously and were relatively successful in finding or keeping jobs.

Recent months have a shown a break in this pattern. Employment of people over age 55 fell by 133,000 in March. Since August, employment of older workers has risen by just 125,000. By contrast, it had risen by an average of 1,150,000 annually over the prior four years, accounting for almost all of employment growth over this period.

Workers in the 25-34 age group seem to be filling the gap, with an increase in employment of more than 680,000 (2.2 percent) over the last seven months. Again, these data are erratic, so the numbers must be viewed with caution.

While many people might view the fact that workers can put in fewer hours to spend more time with their kids as a good thing, there are some people who will complain that they don’t want to subsidize health insurance for others. And many workers will get modest subsidies.

There are two points worth noting. The cost of these subsidies is already incorporated in the budget. Much of it is covered by higher taxes on the wealthy, but there are some taxes and fees which fall on middle income taxpayers. Even including any additional costs associated with the ACA, health care costs have slowed sharply over the last five years.

In 2008, per person costs were projected to be more than 10 percent higher today than is actually the case, meaning that almost everyone is paying less for health care than had been projected.

The other point is that if people are upset about the government giving health care money to people who don’t deserve it, they are looking in the wrong direction when they look to the folks getting subsidies in the exchanges. The typical doctor in this country gets close to $250,000 a year, more than twice as much as doctors in other wealthy countries.

They get these inflated paychecks because the government deliberately limits the supply of foreign and domestic doctors. We also pay twice as much for our drugs and medical equipment due to government policy.

If people don’t want money coming out of their pockets to pay to others, they should be looking at the doctors, the drug companies, the medical supply industry, and of course the insurance industry. They are the big beneficiaries. Complaints about the people getting subsidies in the exchanges are simply a way of expressing a dislike for “those people.” It is not a serious policy issue.