CBO Admits: Health Care Law Will REDUCE the Labor Supply
Earlier this morning the Congressional Budget Office released its annual mid-session update on the economy and federal budget. While most of the report deals with fiscal policy generally, one section in particular contains new information about the impact of Democrats’ health care law. A section on pages 66-67 of the PDF (pages 48-49 of the hard copy version) discusses the “effects of recent health care legislation on labor markets.” Here’s what the non-partisan CBO concludes about the net impact of the health care law:
The Congressional Budget Office (CBO) estimates that the legislation, on net, will reduce the amount of labor used in the economy by a small amount—roughly half a percent—primarily by reducing the amount of labor that workers choose to supply.
CBO goes on to note that “the expansion of Medicaid” and the health insurance subsidies “will encourage some people to work fewer hours or to withdraw from the labor market. In addition, the phaseout of the subsidies as income rises will effectively increase marginal tax rates, which will also discourage work.” CBO also reiterated its earlier conclusions about the impact of penalties on employers who do not offer “government-approved” health coverage:
Those penalties…will, over time, generally be passed on to workers through reductions in wages…However, firms generally cannot reduce workers’ wages below the minimum wage, which will probably cause some employers to respond by hiring fewer low-wage workers. Alternatively, because firms are penalized only if their full-time employees receive subsidies from exchanges, some firms may instead hire more part-time or seasonal employees.
Remember, Speaker Pelosi famously claimed at the White House health summit that the health care law would create 4 million jobs, and “400,000 jobs almost immediately.” Now, the non-partisan Congressional Budget Office has confirmed that not only will the health law not create jobs, it will REDUCE the net labor supply nationwide – killing American jobs, and making an already historically poor job market even worse.