WASHINGTON — Sparking fierce debate, a government analysis released Tuesday projected that the Affordable Care Act will lead American workers to voluntarily put in fewer hours at work, which over the next decade could add up to the equivalent of 2.5 million jobs.
The nonpartisan Congressional Budget Office said it expected total employment and compensation in the whole economy to increase over the next 10 years. But “that increase will be smaller than it would have been in the absence of the ACA,” it said in a report.
The lower work total will come from people who choose not to be employed or to reduce their hours in order to maximize government-provided benefits under the new law. Such a decline is a common phenomenon in social welfare programs, according to the agency.
The projected reduction in hours over 10 years could translate into the equivalent of 2 million fewer full-time jobs in 2017 than otherwise expected and 2.5 million fewer full-time jobs by 2024, the CBO said. While there’s no way to be certain in advance how many people would leave the work force altogether and how many would simply reduce their hours, the estimates reflect new thinking on how the Affordable Care Act might ripple through labor markets.
The report set off a pitched debate, with Republicans simplifying the analysis to claim that it would eliminate jobs, and Democrats saying it was good that workers would have the flexibility to choose to work less.
“The middle class is getting squeezed in this economy, and this CBO report confirms that Obamacare is making it worse,” said House Speaker John Boehner, R-Ohio.
“CBO just reported that #ObamaCare will push 2.5 million Americans out of the workforce,” said a tweet from the National Republican Congressional Committee, the campaign operation for Republicans in the House of Representatives.
“It’s not that the businesses are cutting those jobs,” countered Jason Furman, the chairman of the White House Council of Economic Advisers. The potential decision by workers to reduce their hours is an “option that they didn’t use to have,” he said.
One independent analysis Tuesday said the Republicans overstated their case. “CBO did not say Obamacare will kill 2 million jobs,” said The Fact Checker column in The Washington Post.
But the column also concluded that “the decline in the workforce participation rate has been of concern to economists as the baby boom generation leaves the workforce, and the health care law appears to exacerbate that trend.”
The CBO said that over 10 years, the health care law was likely to reduce compensation nationally by 1 percentage point. That’s a “proportionally smaller” effect than the fall in hours worked.
The impact on hours worked is likely to come further out in the decade, and in the near term the health care overhaul will be a “boost to demand for goods and services,” said CBO Director Douglas Elmendorf. That translates into more jobs, though neither he nor the White House could say how many.
The subsidies for health insurance “will both stimulate demand for health care services and allow low-income households to redirect some of the funds that they would have spent on that care toward the purchase of other goods and services – thereby increasing overall demand,” the CBO report said.