The Future of Health Care Reform - III - Jobs

In my last article in the series, I wrote that PPACA is now expected to have a negative impact on the federal budget due to reduction in labor, and thus the reduction in taxes to the government. Let's dive deeper into how the PPACA will affect the labor market. There are two sides to this issue: Obamacare opponents make a more direct argument on the reduction of jobs and cutting of hours, while Obamacare proponents argue that the law will indirectly improve the labor market.

Negative Impact to Labor Market

Obamacare requires businesses with more than 50 full-time employees to subsidize health insurance for their employees. Full-time employees are defined as those who work more than 30 hours per week. 

Subsidizing health care for employees is large expense for companies. Companies on average pay:

• $5,179 for single employees (83% of the premium)

• $12,591 for employees with families (72% of the premium)

Costs Incurred by Companies to Provide Health Care to Employees

As a result of the law, in order to bring their costs down, many companies have resorted to tactics like:

• Not hiring employees to get under the 50 employee limit

• Cutting hours to less than 30 so as to have fewer full-time employees to provide insurance for

• Cutting other benefits

• Raising prices of their products

• Cutting back on raises

Small Business Health Care Survey
Companies that can't offset the costs of providing health insurance have to deal with lower profits and lower stock prices. These companies pay fewer taxes to the government, leading to the budget deficit we saw in the previous article.

Forbes - Obamacare Killing Jobs

Positive Impact to Labor Market

According to Obamacarefacts, a pro Obamacare website, PPACA "creating new jobs in healthcare and government, increasing operating costs for some larger businesses, eliminating 'job-lock', and saving money for small businesses via the SHOP marketplace."

The website also cites that there have been 58 months of consecutive job growth, so allegations of 'job killing' are exaggerated. 
In addition, PPACA allows for "tax credits for up to 50% of employee premiums to smaller firms with less than 25 full-time equivalents, so they are be able to attract more workers due to their ability to provide them with better benefits at cheaper rates."

The main argument from the pro-Obamacare side is that employees no longer need to stay at jobs they don't like simply to get insurance. Because of the insurance exchanges, they can change jobs to one they like more and still get insurance. Thus, PPACA increases job mobility, which ultimately spurs the economy.

Finally, the strongest argument for Obamacare's positive impact on the economy is the same one that progressives use to justify most of their government spending initiatives: if people are healthier, they will be happier, more productive members of society. In economic terms, they will work harder and generate more revenues for their businesses, thus spurring the overall economy. This is a strong argument, even if it is highly indirect.

Obamacare Facts

Summary

Both sides of the argument have their merits. The negative argument makes a more direct connection between the law's effects and the impact to companies. In addition, we have been in a bull market for the last few years. So, we can't give PPACA the credit for the job growth or say that it hasn't hurt jobs as the effects may have been masked by general economic growth.

The real test of Obamacare and the job market would come if the economy falters. What will employers do then?

Until then, I believe the negative side has the stronger arguments and assert that the direct effects of PPACA aren't good for the economy.