And here is the CBO's explanation of the reduction in the labor supply:
The expansion of Medicaid and the availability of subsidies through the exchanges will effectively increase beneficiaries’ financial resources. Those additional resources will encourage some people to work fewer hours or to withdraw from the labor market. In addition, the phaseout of the subsidies as income rises will effectively increase marginal tax rates, which will also discourage work. But because most workers who are offered insurance through their jobs will be ineligible for the exchanges’ subsidies and because most people will have income that is too high to be eligible for Medicaid, those effects on financial resources and marginal tax rates will apply only to a small segment of the population.
Other provisions in the legislation are also likely to diminish people’s incentives to work. Changes to the insurance market, including provisions that prohibit insurers from denying coverage to people because of preexisting conditions and that restrict how much prices can vary with an individual’s age or health status, will increase the appeal of health insurance plans offered outside the workplace for older workers. As a result, some older workers will choose to retire earlier than they otherwise would.
So, just like I said, the CBO found that some people would choose to retire, either because they are financially better off because of Obamacare, or because they can now afford to buy insurance as individuals, rather than having to get it through an employer.
This is a good result. It's good that Obamacare makes people financially better off.
On page 79, we see the unemployment rate predictions. For the years after 2014, the CBO predicts an average unemployment rate of 5%. They explicitly say they are not predicting business cycles-- nobody can predict business cycles out that far with any accuracy.
So, they're predicting two things. First, the labor supply will go down a little bit, half a percentage point, over what it would have been (NOT over the what it is now, but over what it would have been) as people who don't want to work, but who would have been forced to work just to be able to buy insurance at a reasonable price, can exit the labor force. Second, we'll have full employment (ignoring business cycles) with unemployment at 5%.
To get the number of people employed in the economy, then, they just multiply the predicted labor supply times 95%.
In other words, according to their predictions, no one will lose their job because of this law. Rather, some people will choose not to work.
Are Republicans in favor of people who don't want to work having to work because they or their children have pre-existing conditions so they can't buy insurance on the open market? Is that the Republican position?
The labor supply, by definition, is the people who want to have paying jobs. If someone decides to leave the labor force, whether to retire, to go to school, to stay home with children, or for some other reason, that lowers the labor supply by one person.
Good point, Cartera. Elmendorf clearly says, in the quote I gave, that the reduction in labor will be due to people choosing to work less, which is, as you say, a reduction in the labor supply. He doesn't explain why those people choosing not to work wouldn't just reduce unemployment, as those jobs go to someone else. Perhaps he is assuming full employment at that point?
This is the most ridiculous spin I have seen in some time. There may be a reduction in the supply of labor, not the supply of jobs. If people choose to not work certain jobs, the jobs don't go away.
It's a terrible mistake that sick people won't be forced to work so they can get health insurance from their jobs? Why is that a mistake? It sounds good to me.
Not surprised at all. Of course if lawmakers had actually read the monstrosity perhaps instead of rushing to pass, they would have realized what a terrible mistake on several levels this is.
This has nothing to do with job creation. Rather, Elmendorf is saying that with better health care, people will choose to work less. That is, sick people won't be forced to work.
“We estimated that the legislation, on net, will reduce the amount of labor used in the economy by roughly half a percent, primarily by reducing the amount that people choose to work,” said Elmendorf on Oct. 22.
-- Edited by Cardinal Fang on Friday 11th of February 2011 10:38:10 AM
