What Does “Job-Killing” Mean to You?

Jonathan Chait hits the nail on the head with his analysis of how to consider the CBO’s recent report that Obamacare might lead to 2 million fewer jobs.  In a hypothetical world where a party proposed repealing an already-existing universal healthcare system:

The administration that proposed this plan would certainly have some scraps of good news to cling to. There would be a pretty major influx of labor, and the administration would pitch this as “two million new jobs!” (CBO’s report has been described as predicting Obamacare will decrease employment by two million jobs, but it actually says the equivalent of two million full-time jobs – 40 people working one fewer hour a week adds up to one full-time job.) There would be more people working, more economic output, and more national wealth. Hooray!

But opponents of the law would counter that repealing national health insurance would not create two million new job openings. Rather, it would force (the equivalent of) two million workers to go to work, or to work longer hours, in order to get health insurance. The way this plan would work is that millions of workers who are able to afford health insurance outside of getting it through their job would lose it.

Suddenly desperate and at risk of losing access to medical care for themselves or their families, they would find options like working part-time or staying home to raise their children or running their own business to be impossibly expensive or risky. They would flock to any job they could get that came with insurance as a benefit. The influx of new workers, without any corresponding increase in demand for labor, would decrease wages. Many workers would become less productive because the need to get employer-sponsored insurance would force them into a job that didn’t match their skills.

This is precisely correct – the main reason these 2 million jobs are dropping out of the labor force is because affordable health insurance enables people to make new choices previously unfeasible because of the need for health insurance.  Now, this isn’t the only reason – part of the effect on the labor supply is because the incentive structure of Obamacare creates extremely high “spikes” in effective marginal tax rates.  For example, if you are at the very top of the bracket eligible for Medicaid such that you lose Medicaid if you make more, increasing your earnings might lead to a net loss of income.  This is a real problem with the law as a pure issue of execution.

But the problem of ending “job lock” depends highly on your moral theory of the economy.  If you view it as morally praiseworthy to force Americans to work their fingers to the bone, then ending job lock is a catastrophe for America that will end in laziness, moral decrepitude, and occupying Wall Street.  If you view it as morally praiseworthy for the government to advance Americans’ autonomy in their own decision-making, then ending job lock is a strong moral win.  It allows Americans more flexibility to maximize their own utility via entrepreneurship, freelancing, better job-matching, or simply retirement.  Chait’s inversion of the situation puts this question in strong relief – and I think it suggests that the vast majority of Americans fall into the latter camp.

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