Thursday, October 23, 2014

Economist: Healthcare Reform Discourages Work and Upward Mobility

This is from the Oklahoman:
BACKERS of Obamacare sometimes claim that increasing insurance coverage will make it easier for many citizens to achieve the American dream. Yet research by economist Casey B. Mulligan finds that Obamacare’s perverse incentives will effectively trap many people in part-time jobs and impede upward mobility.

In a paper done for the Mercatus Center at George Mason University, Mulligan studied how Obamacare’s taxes — both explicit and implicit — will affect workers. His conclusion: The so-called Affordable Care Act will ultimately reduce weekly employment per person by about 3 percent. That translates into roughly 4 million fewer full-time-equivalent workers. 
Mulligan notes that three major provisions of Obamacare “introduce incentives to change the workweek” with two provisions particularly influencing workers’ behavior. One of those provisions makes employees ineligible for government insurance subsidies if a business offers coverage to full-time workers. “This is, in effect, an implicit tax on full-time employment,” Mulligan writes. “The forgone subsidies include cost-sharing assistance — federal dollars that reduce a family’s health insurance deductibles and copayments — as well as premium assistance administered through the federal personal income tax. Altogether, these subsidies can easily be worth more than $10,000 per year.” 
The other Obamacare provision affecting workers’ behavior reduces subsidies as income increases. As a result, a worker earning additional income will not only face increased federal and state income tax liabilities, but also the loss of insurance subsidies. “Like any additional marginal earnings tax, this implicit tax can reduce hours worked,” Mulligan notes. 
To illustrate his point, Mulligan compares two scenarios. In one, a worker has a full-time job (40 hours per week). In the other, he has a part-time job (29 hours). Based on gross compensation — $52,000 versus $37,700 — one would assume the full-time job would be preferable. But after accounting for the loss of Obamacare subsidies, the impact of other non-Obamacare taxes, and deducting traditional employment expenses (such as commuting and child care), Mulligan notes the wage difference disappears. In fact, the part-time job could provide the worker slightly more money overall — $28,854 versus $27,021. ...