Obamacare Will Surely Increase Unemployment…Or Will It?

Considering all the problems and controversies surrounding the Affordable Care Act, it is hard for even the most experienced economists to predict the impact it will have on the U.S. economy. In fact, nobody can seem to agree on whether or not it is going to hurt or help the unemployment rate in the long run. The national unemployment rate dropped from 7 to 6.7% in December, but much of that can be attributed to individuals leaving the workforce altogether. Regardless, officials are torn on whether or not the ACA’s long-term effects will be positive or not.

On February 4, the Congressional Budget Office announced that the equivalent of nearly 2.5 million full-time jobs would be lost as a consequence of the ACA, which, on the surface, would have a great influence on the unemployment rate. Senator Chuck Grassley claimed that the CBO’s findings will “cause the loss of 2.5 million jobs.” Lanhee Chen, a former Romney advisor, added that the ACA “will result in 2.5 million jobs lost.”

“The law will provide healthcare to people who otherwise wouldn’t have it, which is good, but the management of new rules and requirements will cost businesses time and money,” explains Doug O’Grady, Sales Director with SalesForce Search.

However, as officials and media alike are getting more familiar with the report from the CBO, it seems as thought those statements might have been premature. Essentially, according to Greg Sargent of The Washington Post, “The CBO report actually says that the impact of the ACA will be ‘almost entirely’ due to a decline in labor that ‘workers choose to supply.’ It says explicitly that the ACA’s impact will not be felt as an “increase in unemployment” or “underemployment.” That is quite different than what was previously reported.

To go one step further, Obamacare, as the ACA law has been dubbed, could actually decrease unemployment by helping workers find jobs. During a line of questioning from Rep. Chris Van Hollen, that is exactly what CBO director Douglas Elmendorf suggested. He said that the ACA “spurs employment and would reduce unemployment over the next few years.” Later, after being asked, “When you boost demand for labor in this kind of economy, you actually reduce the unemployment rate, because those people who are looking for work can find more work,” by Van Hollen, Elmendorf simply stated, “Yes, that’s right.”

But Sarah Kliff cites data from studies in Tennessee and Wisconsin that seem to challenge that point. In her column at The Huffington Post she points out that jobs will be lost, rather than “killed,” as some ACA opposition suggest.

“This is not about the Affordable Care Act killing jobs,” says Craig Garthwaite, a health economist at Northwestern University’s Kellogg School of Business. “This is about people making choices. We might not be happy if people are choosing to leave the labor force, but it’s a reflection of the policies that we’ve set up.”

Sargent notes that the argument being made about Obamacare potentially being a disincentive to work “at least exists within the parameters of what the CBO report actually said.” But the idea that some 2.5 million jobs will be lost seems to be a stretch.

In 2014 and beyond, business owners across the country will no doubt be watching carefully to see how everything unfolds.