President Barack Obama’s signature health insurance plan, Obamacare, is expected to reduce an amount of work hours equivalent to 2 million jobs in the next 10 years, amid a series of incentives not to work or to work less, states Fox News.
A report from the Congressional Budget Office estimates that the Affordable Care Act, also known as ACA, will shrink labor supply by 0.86 percent in 2025, which roughly translates to about 2 million full-time workers.
The law to federal programs and tax policy reveals its effects
The main reason behind this is workers’ response to changes made by the law to federal programs and tax policy. CBO also points to the introduction of new Obamacare subsidies, tied to income as a key factor. In turn, it raises effective tax rates as someone’s earning’s rise, reducing the amount of work Americans choose to do.
“Subsidies decline as income increases, reducing the return on earning additional income,” says the report. “That decline is effectively an increase in recipients’ effective marginal tax rate, so it generally reduces their work incentives through the substitution effect.”
The CBO predicts that a very important factor to the workforce cut will be the consequence of insurance subsidies, making it easier for some people to work less or even stop working. Of course, this will be seen as an advantage by Obamacare supporters, since they won’t lose health insurance after stopping the work.
It could lead to a higher unemployment rate
“Some people would choose to work fewer hours; others would leave the labor force entirely or remain unemployed for longer than they otherwise would,” the report says.
Like expected, Republicans weren’t that impressed, considering this report a proof that the law is not working.
“When the President’s health law – Obamacare – hurts the labor force at the same time it increases health care premiums and taxes, it’s clear the law is not working for the American people,” Senate Finance Committee Chairman Orrin Hatch, R-Utah, said in a statement.
