Health Law Seen Having Bigger Effect on Labor Supply

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from The Wall Street Journal,

Affordable Care Act Seen Reducing Equivalent of 2.3 Million Full-Time Workers by 2021.

The Affordable Care Act is projected to reduce the number of hours that Americans work by more than previously estimated, while insuring fewer people than expected this year, according to a Congressional Budget Office report.

The report Tuesday estimated the law would reduce the supply of labor by the equivalent of roughly 2.3 million full-time workers through 2021, more than a previous CBO estimate of the equivalent of 800,000 workers in that time frame. The nonpartisan agency said most of that would come from people choosing not to work or working less in order to keep their incomes low enough to continue to get subsidies toward buying coverage.

The new estimates come as Republicans plan to use the health law—which remains unpopular with many Americans—as a campaign tool against vulnerable Democrats in this November’s midterm elections.

The White House on Tuesday defended the Affordable Care Act in light of the new CBO report, pointing to a section in the report that says there has been “no compelling evidence that part-time employment has increased as a result of the ACA.” President Barack Obama’s chief spokesman, Jay Carney, said in a statement Tuesday that, “While many factors affect job growth, the actual performance of businesses refutes those who predicted that the Affordable Care Act would dramatically hurt the economy.”

The CBO last year projected seven million people would enroll for health insurance through new health-care exchanges this year. But Tuesday, it said technical problems that plagued the program’s rollout forced it to lower its estimate by one million people.

The rolling impact of the health law will lead to a reduction in hours worked that equals about two million people by 2017, 2.3 million by 2021 and 2.5 million through 2024, the agency forecast. This represents a 1.5% to 2% reduction in the numbers of hours worked.

The agency said several factors were behind the labor-force projections. It forecast some people won’t work or will work less to keep their incomes low enough to ensure federal health-insurance subsidies aren’t phased out. Higher-income workers whose tax rates were increased to help pay for the law may choose to work less, the CBO said.

In addition, because the ACA, starting in 2015, will impose a penalty on companies that employ 50 or more full-time workers but don’t offer insurance, the CBO figures that employers’ demand for workers could decrease and could result in cuts to wages as costs are passed on to employees.

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