March 3, 2014

The ACA Lowers Employment, and That's Terrible News

Charles Blahous

J. Fish and Lillian F. Smith Chair
Summary

On February 4, the Congressional Budget Office (CBO) released a report that instantly became a focus of intense controversy. The report found that the Affordable Care Act (ACA or “Obamacare”) would reduce US employment by the equivalent of 2 million full-time workers by 2017, 2.5 million by 2024. This news was received in the context of the polarizing politics surrounding the ACA, with commenters choosing sides over the report according to their attitudes toward the health law itself. 

Contact us
To speak with a scholar or learn more on this topic, visit our contact page.

On February 4, the Congressional Budget Office (CBO) released a report that instantly became a focus of intense controversy. The report found that the Affordable Care Act (ACA or “Obamacare”) would reduce US employment by the equivalent of 2 million full-time workers by 2017, 2.5 million by 2024. This news was received in the context of the polarizing politics surrounding the ACA, with commenters choosing sides over the report according to their attitudes toward the health law itself. 

When CBO’s findings are instead viewed from the standpoint of our larger economic policy challenges, it becomes clear that this consequence of the ACA is unequivocally bad, irrespective of one’s general attitude toward health care reform. To clarify this, let’s step back from the debate over the ACA for a moment and examine the current state of our economy. 

Our prosperity derives from two factors: the first being how much Americans work, the second being how productive we are while working. Perhaps America’s biggest current economic problem is that workers are leaving the labor force by the millions. Part of the worker drain is due to population aging and was a widely-anticipated problem. But other factors have also arisen to make the exodus much worse than foreseen. 

In 2007, we knew we had a significant problem coming when the baby boomers would begin to leave the workforce. The growth of our labor force would slow, and our economic growth would slow along with it (these data come from annual Social Security trustees’ reports). 

Continue reading