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It has always been clear that health reform will induce some Americans to work less. Some people will, for example, retire earlier because they no longer need to keep working to keep their health insurance. Others will reduce their hours to spend more time with their children because insurance is no longer contingent on holding a full-time job. More subtly, the incentive to work will be somewhat reduced by health insurance subsidies that fall as your income rises.
The budget office has now increased its estimate of the size of these effects. It believes that health reform will reduce the number of hours worked in the economy by between 1.5 percent and 2 percent, which it unhelpfully noted “represents a decline in the number of full-time-equivalent workers of about 2.0 million.”
Why was this unhelpful? Because politicians and, I’m sorry to say, all too many news organizations immediately seized on the 2 million number and utterly misrepresented its meaning. For example, Representative Eric Cantor, the House majority leader, quickly posted this on his Twitter account: “Under Obamacare, millions of hardworking Americans will lose their jobs and those who keep them will see their hours and wages reduced.”
Not a word of this claim was true. The budget office report didn’t say that people will lose their jobs. It declared explicitly that the predicted fall in hours worked will come “almost entirely because workers will choose to supply less labor” (emphasis added). And as we’ve already seen, Mr. Elmendorf did his best the next day to explain that voluntary reductions in work hours are nothing like involuntary job loss. Oh, and because labor supply will be reduced, wages will go up, not down.
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shaun james bockert 