Wednesday, February 05, 2014

No, It Won't "Cost" Jobs

I’m no big fan of “Obamacare,” still consider it a horribly botched piece of legislation, but that doesn’t mean I’m going to jump onto any silly bandwagon that provides an opportunity to bash it. I’m referring to the latest such effort of using the CBO report which says that Obamacare “will cost 2.5 million jobs” for that purpose, because that’s not what it says at all.

It says that Obamacare will likely cause 2.5 million people to “pass up on taking full time work” which, as I will explain, is actually more in the line of creating jobs rather than eliminating them. The effects are twofold.

The first consists of people who wish to retire but are too young for Medicare and have therefor continued to work because they needed health care benefits provided by their employer. They could not buy insurance on the private market previously, but now they can, so they will ditch their jobs and retire. That is, to some people, “costing” a job, but to anyone with any sense it means that one person is given freedom to exercise a choice and a job opening is created for a person who wants and/or needs to work. In what way is that a loss to anyone?

The other is that the subsidy for health insurance rises as one’s income diminishes, so an incentive is provided for one to lower one’s income, that is to work less, in order to get cheaper health insurance. This is on the same lines as thinking that unemployment benefit provides an incentive to remain unemployed; it undoubtedly does to a small minority of people who receive that benefit, but for the vast majority it does nothing of the sort. It keeps them alive while they frantically look for work.

I strongly suspect that the CBO’s projection of the amount of work reduction that will occur in pursuit of higher health insurance subsidies is vastly overblown. It’s kind of silly, actually, to assume that very many people will surrender $8000 income to gain $1000 on their health care subsidy, but even it they do, so what? The less work one person does the more work which is made available for another person who needs the money.

The fundamental basis of the CBO’s assumptions is flawed, because their whole theory requires that employment numbers be determined by the number of people who want to work, rather than by the number of jobs that employers want/need to fill. Using the CBO’s assumption to say that “Obamacare will cost 2.5 million jobs” would mean that unemployment would always be zero.

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