No, the CBO Did Not Find That the ACA Kills Jobs

For years, health and labor economists have studied the inefficiencies created by the fact that most Americans under 65 get health insurance through their job. One potentially large inefficiency is “job lock”—people making decisions to take and/or keep a particular job because without it, they wouldn’t have affordable health insurance. The research literature tells us that job lock occurs among workers who would otherwise be entrepreneurs, those who would rather retire, and full-time workers who would rather work part-time, as well as for a host of other reasons.

The value of the employer-sponsored health insurance system is two-fold (and please bear with the oversimplification). First, it pools risk and charges the same price for workers within an organization regardless of their or their dependents’ health status. Second, it’s far better than what’s historically been offered in the individual health insurance market (e.g. denied policies, excluded conditions, discriminatory pricing, etc.). Enter the Affordable Care Act, which has now established state-based health insurance exchanges that significantly reform the individual insurance market and make it possible for many workers and their families to find affordable health insurance coverage outside the employment-based market.

Which brings us to today. The Congressional Budget Office released its Budget and Economic Outlook, and, in Appendix C, one can find an expanded discussion of the labor market effects of the Affordable Care Act.

Not surprisingly, the CBO finds that, all else equal, people are less likely to work and will work fewer hours under the ACA. They find, and I quote, “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 business’ demand for labor” (page 117).

These are purely voluntary labor supply decisions, not people being laid off from jobs they’d rather keep, or people looking for work and being unable to find it. Working-age adults can now choose, without regard to their need to secure health insurance, whether they wish to supply labor and how much labor they wish to supply to the labor market. This is unabashedly a good thing for them.

Opponents of the ACA will try to paint these CBO estimates as evidence that the ACA has “killed jobs” or something like it. That’s flat wrong. What the ACA has done is expand the menu of options available to Americans about how to obtain decent health insurance without having their income fall to poverty levels. That menu used to include one option—“go to work for a large employer.” The fact that it’s broader now is an unambiguously good thing.