A Look at Policy Repercussions

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The debate continues over whether or not the Affordable Care Act (Obamacare) is good for the nation and its economy. As highlighted in the Washington Post, a recent report from the Congressional Budget Office (CBO) on Obamacare offers another chance to observe how subsidies and government policies might change the course of individual, and thus collective, action.

The debate continues over whether or not the Affordable Care Act (Obamacare) is good for the nation and its economy. As highlighted in the Washington Post, a recent report from the Congressional Budget Office (CBO) on Obamacare offers another chance to observe how subsidies and government policies might change the course of individual, and thus collective, action.

In this case, the CBO predicts a workforce reduction equivalent to 2.3 million full-time employees across the nation by 2021 as a result of Obamacare. The main cause seems to be a built-in penalty on insurance prices for those who earn higher wages. According to the Washington Post,

“After obtaining coverage under the health-care law, some workers will choose to forgo employment, the report said, while others will voluntarily reduce their hours. That is because insurance subsidies under the law become less generous as income rises, so workers will have less incentive to work more or at all.

The design of the subsidies — like many programs in the social safety net — represents ‘an implicit tax on additional work,’ CBO Director Douglas Elmendorf said.”

Source

Apparently, some employers are also expected to cut employee hours or keep staff down to avoid fines for not offering insurance to employees working over 30 hours.

Is this a positive result of the Obamacare policy?

Some argue that it opens the door to taking more time for children or retirement, but on the other hand, it is an implicit penalty on productivity. When the government creates incentives—whether built into the tax code, regulations, or subsidies—people respond.

Is less productivity what we would want to encourage? In addition, with potentially less worker productivity (and therefore potentially less national wealth), is this the type of program we can pay for?

>>Source: Goldfarb, Zachary A. and Amy Goldstein. “Health-care law will prompt over 2 million to quit jobs or cut hours, a CBO report says.” The Washington Post. 4 Feb. 2014.

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