Fact Checker: CBO didn’t say health-care law will kill 2M jobs

Here we go again. During the 2012 campaign, we had to repeatedly explain that the Congressional Budget Office never said that the Affordable Care Act “killed” 800,000 jobs by 2021. Now, the CBO has released an updated estimate, nearly the triple the size of the earlier one: 2.3 million in 2021.

The inevitable tweets arrived:

“Non-partisan CBO report admits ObamaCare is hurting the economy, will cost 2.5 millions jobs.” – NRCC

This tweet and dozens others were spawned in part by seriously flawed headlines on the Web:

Health-Care Law Expected to Take Greater Toll on Workforce

Obamacare will push 2 million workers out of labor market: CBO

CBO: Obamacare to cost 2.3 million jobs over 10 years

CBO: Lower enrollment, bigger job losses with Obamacare

CBO: O-Care slowing growth, contributing to job losses

The CBO Just Nuked Obamacare

CBO says Obamacare will add to deficit, create reluctant work force

CBO nearly triples estimate of working hours lost by 2021 due to Affordable Care Act

Obamacare Will Cost 2.5 Million Jobs: Report

Congressional Budget Office: Obamacare A Tax On Workers

What’s really going on here? Hang on, because it’s a confusing issue.

First, this is not about jobs. It’s about workers – and the choices they make.

The CBO’s estimate is mostly the result of an analysis of the impact of the law on the supply of labor. That means how many people choose to participate in the work force. In other words, the nonpartisan agency is examining whether the law increases or decreases incentives for people to work.

One big issue: the health insurance subsidies in the law. That’s a substantial benefit that decreases as people earn more money, so at a certain point, a person has to choose between earning more money or continuing to get the maximum help with health insurance payments. In other words, people might work longer and harder, but actually earn no more, or earn even less, money. That is a disincentive to work. (The same thing happens when people qualify for food stamps or other social services.)

Thus, some people might decide to work part-time, not full time, in order to keep getting health-care subsidies. Thus, they are reducing their supply of labor to the market. Other people near retirement age might decide they no longer need to hold onto their job just because it provides health insurance, and they also leave the work force.

Look at this way: If someone says they decided to leave their job for personal reasons, most people would not say they “lost” their jobs. They simply decided not to work.

The CBO, in its sober fashion, virtually screams that this is not about jobs. (Note the sections in bold face.)

“The estimated reduction stems almost entirely from a net decline in the amount of labor that workers choose to supply, rather than from a net drop in businesses’ demand for labor, so it will appear almost entirely as a reduction in labor force participation and in hours worked relative to what would have occurred otherwise rather than as an increase in unemployment (that is,more workers seeking but not finding jobs) or underemployment (such as)part-time workers who would prefer to work more hours per week).”

The CBO did look at the effect on demand for labor (i.e., jobs) but said the effects are mostly on the margins or are not measurable. In fact, in contrast to a common GOP talking point, the CBO declares that “there is no compelling evidence that part-time employment has increased as a result of the ACA,” though it notes the data may be murky because the employer mandate was delayed until 2015.

All things being equal, in a normally functioning economy, the total demand for jobs would equal 95 percent of the supply of jobs. So advocates of the Affordable Care Act should not jump to the conclusion that departing workers will be simply replaced by other workers. In fact, competition for workers will initially lead to upward pressure on wages. But over time, the nation does end up with a slightly smaller economy.

Finally, we should note that the figures (2 million, etc.) are shorthand for full-time equivalent workers – a combination of two conclusions: fewer people looking for work and some people choosing to work fewer hours. The CBO added those two things and produced a hard number, but it actually does not mean 2 million fewer workers. (This is also off a base of more than 160 million people.)

In fact, no one really knows what percentage will leave the work force entirely and what percentage will shift to part-time work, making it difficult to predict how this will shake out in the end.

The Fact Checker takes no position on the implications of the CBO’s analysis. Some might believe that the overall impact of the health law on employment is bad because it would be encouraging people – some 2.3 million – not to work. Indeed, the decline in the workforce participation rate has been of concern to economists, as the baby boom generation leaves the work force, and the health-care law appears to exacerbate that trend.

Moreover, the argument could go, this would hurt the nation’s budget because 2.3 million fewer people will pay taxes on their earnings. That’s certainly an intellectually solid argument – though others might counter that universal health care is worth a reduction in overall employment – but it’s not at all the same as saying that all of these jobs would be lost. Some jobs will go away, but the actual number is unclear because of the unknown interaction between part-time and full-time work.

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