How happy should we be about ACA supply-side responses to work less?

by on February 5, 2014 at 11:22 am in Economics, Law, Medicine, Uncategorized | Permalink

Following the CBO report that Obamacare will induce many people to leave the workforce or cut back on their hours, I have read numerous blog posts suggesting this is benign or possibly even favorable.  After all, why should people be forced to work just to keep their health insurance?  Imagine a 57-year-old man, freed from the necessity to grub for pay at a second-class retail job, which he had to take just to get insurance to cover the bills for his periodic back treatments.

Alternatively, when I read about demand-side shocks which induce unemployment, I am reminded of the work of Alan Krueger.  In two papers, one of which is quite recent, and does not stem from the Heritage Foundation, Krueger shows rather convincingly that the unemployed maintain reservation wages which are simply too high.  They would be better off lowering those wages, being more realistic, accepting work, and getting back on their feet again.  In other settings (not considered by Krueger), other workers seem to be too slow to move to new areas for new jobs, given the costs of being unemployed long-term.

A lot of Keynesians try to maintain the communication of the feeling (if not the outright statement) that demand-driven employment shocks have very little to do with the choices of workers but that is closer to wrong than right.  (By the way, sarcastic comments about soup kitchens causing the Great Depression belie an understanding of both this argument and of contemporary search models for the labor market.)

OK, given all that, when those workers, hit by negative shocks, do not rush to go back to work at lower reservation wages, we then read a portrait of hysteresis, despair, and soul-crushing joblessness, a psychic swamp so difficult to escape that even summoning up the strength to go back to work may be difficult.

In other words, would-be workers irrationally undervalue the benefits of having a job and they also underestimate the costs of remaining unemployed.

Now let’s switch settings.  A benefit shock comes along, positive for many people, and it induces many of them to work less or not work at all.  How happy should we be?  And here I mean happy at the margin, due to their change in employment decision.

People, it is rather difficult to have it here both ways.  I guess it is possible that workers are irrational in changing their employment decisions in response to changes in relative dollar wage opportunities, but rational when changing their employment decisions in response to changes in relative benefit opportunities.  It really is possible.  But are any of you actually arguing that or holding some deep-seated reason for believing in that difference, other than perhaps the reason this post might have induced you to come up with?  No, I see one assumption about a destructive choice in one context and the opposing assumption about a beneficial choice in the other context, without much regard for the tension or contradiction between those two assumptions.  A lot of you may be subbing in general feelings — “unemployment is terrible,” and “ACA is good,” and simply transferring those general feelings to feelings about the respective marginal changes in employment in each case.  That is a fallacy and dare I say it is a “mood affiliation” fallacy?

And by the way, the distinction between a substitution effect and an income effect is a little tricky in this context.  But providing ACA-subsidized health insurance for non-workers is in general a substitution effect which switches them out of working in a way that, if pro-ACA stories about adverse selection and uninsurability are true, a simple equivalent cash grant would not.

A simpler possibility is that people undervalue the long-term benefits of having a job and thus in both settings the contraction in employment is a quite negative outcome.  That is then very bad news for ACA, if only in expected value terms.

I am reading what people write on this topic and seeing massive fog through my spectacles, a bit on both sides of the debate in fact.

Addendum: Ross Douthat made a good point:

At 500,000-800,000, I wasn’t *that* troubled: http://nyti.ms/1exzxlm  At 2-2.5 million, I am. Is there a # that would trouble @CitizenCohn?

Ross has additional comments here.

prior_approval February 5, 2014 at 11:44 am

‘No, I see one assumption about a destructive choice in one context and the opposing assumption about a beneficial choice in the other context, without much regard for the tension or contradiction between those two assumptions.’

Yet when talking about health insurance, it is only the U.S. where ‘choice’ is even discussed – no where else in the industrial world (with its variety of signiificantly cheaper and essentially universal health care systems) is this a topic.

This is not just foggy, it is basically incomprehensible for non-Americans to even think is meant seriously –

‘But providing ACA-subsidized health insurance for non-workers is in general a substitution effect which switches them out of working in a way that, if pro-ACA stories about adverse selection and uninsurability are true, a simple equivalent cash grant would not.

A simpler possibility is that people undervalue the long-term benefits of having a job and thus in both settings the contraction in employment is a quite negative outcome. That is then very bad news for ACA, if only in expected value terms.

I am reading what people write on this topic and seeing massive fog through my spectacles, a bit on both sides of the debate in fact.’

This connection between being employed and having health care is not considered something that any civilized nation would consider worth discussing, as no other industrial society has done this for decades. Especially in regards to children, of course.

msgkings February 5, 2014 at 2:06 pm

Thank you for bringing this to our attention, p_a. Without your posts I would have no idea that other countries have different health care systems than the US.

Seriously, thank you.

Seriously.

prior_approval February 5, 2014 at 2:52 pm

Hey, just doing the same sort of repetition that Prof Cowen indulges in – but then, he believes that ACA will fail, as noted in this interview in Die Zeit, October 11, 2013 – ‘Ich glaube nicht, dass die Reform funktionieren wird.’

I believe this web site likes to call this sort of constant citing of what supports one’s already established beliefs ‘mood affiliation.’ And in that same interview, one reason he thinks that the reforms will fail is because more American citizens will have access to health care.

Or now, apparently in a new twist, broader access to health care means Americans won’t work, or something equally absurd. A trend not seen in any other of those health care systems, none of which seem to be destined to fail. It is only the American system that Prof. Cowen feels is impossible to make work in a fashion recognizable to a citizen living in any other industrial society – ‘Aber derzeit sehe ich nicht, dass in dieser Richtung etwas passiert’ (referring, oddly enough, to the fact that American health care system is not transparent at all, and is not subject to market pressures). He is being much too coy here – as this web site clearly lays out, Prof. Cowen is more than a mere observer of extending health care to his fellow citizens. Back in that October interview, it was due to exploding costs and the fact that the well off would be at the head of the medical line anyways, essentially ending the discussion with a shrug of his metaphorical shoulders.

Now, apparently, it is because when people have access to health care, they can tell their employer to take this job and shove it, without worrying about the health of themselves or their family members.

Strangely, what is considered an advantage recognizable at first glance to anyone not American, has become another reason why having American citizens getting even a taste of what has been standard in other industrial countries for decades, when not generations, would be a disaster.

Who knows? Maybe America is truly exceptional.

Jay February 5, 2014 at 5:28 pm

“And in that same interview, one reason he thinks that the reforms will fail is because more American citizens will have access to health care.”

Well good thing that hasn’t happened yet then.

I would only call it mood affiliation if Mr. Cowen chose to ignore all the big news stories that were positive about the law, though we’re still waiting for those.

Mark February 5, 2014 at 5:32 pm

I seem to recall numerous posts on this site during the lead up period in which it was predicted the ACA site would not function as during the period in which it wasn’t functioning.

Now that it seems to be functioning, I haven’t seen any follow-ups or appraisal of the status.

TMC February 5, 2014 at 8:49 pm

Still not working well, there are many stories where people think they are signed up and nothing got to the insurer. Maybe Tyler just isn’t piling on.

leftistconservative February 6, 2014 at 3:41 am

Well, CorpGovMedia rarely draws comparisons to the healthcare systems of the other western nations. Yes, I know, Moore made a movie about it. Still, for every 100 detailed mentions of the problems of american healthcare in CorpGovMedia, you might get 1 detailed comparison to healthcare systems of other western nations.

Thus, it behooves us to make up CorpGovMedia’s deliberate inattention to this aspect of the situation. And what is the situation? Extortion. We are being extorted for healthcare. Period.

And should we be happy about ACA allowing older people to retire or semi-retire early because they are no longer being extorted for healthcare?
Does that question even need to be asked?

Slappy McFee February 6, 2014 at 11:21 am

Clearly extortion means different things to you and me.

leftistconservative February 6, 2014 at 8:36 pm

clearly I am a worldly and experienced man with a broad education and a wealth of work experience. You however are most likely in your twenties and probably a student.

Jay February 6, 2014 at 1:50 pm

Read the report again, the 2.5m aren’t grandma and grandpa retiring early, it is people who can and should be working offering up less hours because the marginal tax rate on additional hours of work is not worth it due to the subsidy structure. So no, we should not be happy about it.

leftistconservative February 6, 2014 at 8:36 pm

“And should we be happy about ACA allowing older people to
retire or semi-retire ….”

read what I wrote!

Paul Zrimsek February 5, 2014 at 6:01 pm

As international differences in social practices go, this is pretty small potatoes. Are people in the other industrialized nations really that insular? (You we already know about.)

derek February 5, 2014 at 8:52 pm

Bosh. In Canada, with free health care, if you don’t work you get a pittance for welfare or unemployment insurance. If you want to eat you work.

Tigercat February 6, 2014 at 4:14 pm

I find this analysis patronizing. The idea that that the law will have a negative effect because people (really, more like children in this analysis) are likely to become depressed by not working. Did it occur to you that that is totally dependent on the circumstances? People seem to find other things to do–including taking jobs that they enjoy more, despite the lack of benefits, going back to school, self-employment (Etsy anyone?) or whatever they can afford to do. People who lose their jobs and endure financial hardship do not enjoy the stress of the experience–but they are not chosing to leave their jobs. SOME people retire to find it boring and they start voluteering and doing enjoyable pt work. Give me a break.

rayward February 5, 2014 at 11:48 am

How about completely severing the connection between health insurance and employment. Okay, not gonna happen. Of course, Cowen is correct that in a perfect world the rational worker would be more flexible about wages and hours in making job decisions when demand for employees is slack if he didn’t have income subsidies provided by government (including the ACA-provided subsidies for health insurance). And bankers would be more careful in making loans and investors would be more careful in making investments if they suffered, or expected that they would suffer, the consequences of their actions. As Robert Shiller tells his classes in finance at Yale, in a perfect world all risks (income, health, all) would be shared so that the per capita cost would be nominal – by which he is expressing his support for financial innovation not welfare. Alas, we don’t live in a perfect world. And bankers and investors and hourly workers are thankful for it.

Yancey Ward February 5, 2014 at 12:15 pm

How about completely severing the connection between health insurance and employment

Be clear as to what this means, and does not mean. If I and everyone else is buying insurance on the individual market, the connection between health insurance and employment has not been completely severed, or even severed to any great degree for most people. What you mean (and I am not picking on you, by the way) is severing the link between a particular job.

mulp February 6, 2014 at 1:38 am

You forget that asset price inflation creates wealth and the wealth effect means you can spend more than you earn, so if pump and dump asset churn is riving the stock market up exponentially, and you own some share, you can borrow and spend your way to riches without work, all thanks to the economic theory that value is defined by price, not by original labor cost less depreciation.

The stock market is about twice what it was a two months after Obama took office so those in the market are much wealthier so they no longer need to work, obviously. Just like Mitt Romney didn’t need to work because inflated asset prices created his wealth.

AndrewL February 5, 2014 at 12:23 pm

The advantage of employer provided health insurance is that the employer can negotiate group rate with the insurance company.

If the health insrance and employment link was severed and everyone went on to the individual market, all the sick people may opt to choose 1 particular insurance company because it offers a good benefit. This would be bad for the insurance company, and they would have to raise their premimums which would be bad for the employee. All the healthy people may opt for no insurnace or a plan that was super cheap but had nearly no benefits.

So if the employer offers helath insurance as a benefit, the employer can provide a garauntee mix of indivduals as a group for an insurance company to insure. The company pays a portion or all of the premimums for both healthy and sick employees (Thats why COBRA rates are insane). Since the company is offering it as a benefit, healthy people don’t see it as a cost to them, and get coverage, and the insurance company gets the healthy persons perimums.

Since most people spend a majority of their time at work, insurance policies can be tailored to different work related hazards and risks, basically optimizing the allocation of risk and premimums.

Mort Dubois February 5, 2014 at 10:00 pm

Clearly you have never been an employer. Only very large groups have any leverage with insurers, those with thousands of members. The vast majority of companies are much smaller, and the healthcare purchase is a take it or leave it proposition. Also, no employer can guarantee to provide a mix of healthy/non healthy individuals to anybody. It’s not ethical for the employer to inquire into the health status of their workers, and would be illegal to hire/fire to maintain a particular mix. Also, there is a special type of insurance for the hazards of work – it’s called Workman’s Compensation insurance. Premiums for that are based on the profession of the workers involved, and the safety record of the employer. In my state, Pennsylvania, it’s offered by a different set of companies than ordinary health insurance, and is intended for non-routine care only.

mulp February 6, 2014 at 1:40 am

Over half the people covered by employer health benefits do not work for the employer; in fact, a large number can not work legally at all – they are under age 13.

JeffC February 6, 2014 at 1:53 pm

“The advantage of employer provided health insurance is that the employer can negotiate group rate with the insurance company.” Right, so the tax benefit isn’t a factor ? really ? a group rate for insurance doesn’t exist … its pool size that drives the calculations, period …

Tigercat February 6, 2014 at 4:22 pm

I think you have totally missed the whole point of the exchanges–they create a mixed risk pool and that is how they can offer rates as low or lower than employers can offer for the same quality products…that’s the whole point.

Brian Donohue February 5, 2014 at 11:57 am

This goes way beyond economics.

As Voltaire said, “Work banishes those three great evils: boredom, vice and poverty.”

Homer makes the same point re: lotus-eaters. Odysseus got the hell out of there.

It’s not a new issue. It’s not a scarcity issue. It’s not a freeloading issues.

Idle poor, idle rich: the enervation is all the same.

Turkey Vulture February 5, 2014 at 12:06 pm

I really dislike working. I don’t like being tied down, and want to pursue other activities. But at points in my life when I haven’t worked, or have worked minimally, I have tended to just waste time doing nothing of use. And I want to do things, accomplish things, I just don’t. I am lazy, and especially so when I have no immediate need to do anything. This lowers my life satisfaction. But still, even knowing this, if I have a way to get by without having to work, I will be tempted to take it, and probably lose the good habits a regular job can bring.

I think most people are like this, which is why even though I will never pray at the alter of the protestant work ethic, I think that programs that encourage idleness can lead people into a rut from which they won’t have the wherewithal to escape. But hey, maybe everyone else is more of a go-getter than me, and I’m completely off base.

Brian Donohue February 5, 2014 at 12:10 pm

Agreed. You sound like a human. I don’t think Homer was a Protestant.

My favorite expression from my dad: If you want something done, give it to a busy person.

Turkey Vulture February 5, 2014 at 12:13 pm

My favorite expression from my dad: wish in one hand, shit in the other, and see which one fills up faster. I’m sure there’s a way to stretch and make that relevant here, but really I just like saying it.

Dan S February 5, 2014 at 12:24 pm

Haha! Brian as much as I like your dad’s expression, Turkey’s is much more entertaining.

My dad is partial to Nelson Algren’s “Never play cards with a man called Doc. Never eat at a place called Mom’s. Never sleep with a woman whose troubles are worse than your own.” I’ve read that book, and truth be told I still don’t understand how the first two rules are supposed to make sense outside of the context of the book.

Al February 5, 2014 at 5:07 pm

awesome.

Arjun Narayan February 5, 2014 at 12:16 pm

This is a really good point. One easy place to see this is grad school. Lots of students have real “idleness ruts” in the free form structure of graduate school. In grad school you have a basic income, all the facilities, libraries, etc. of your university, and a lot of free time to do whatever you want (at least for many months before you are held accountable – in computer science, sometimes for over a year before people ask questions). In general you also have access to top experts in all fields (in general, almost all professors will give a grad student a first meeting, and certainly so if you are in their department.)

Yet grad students often don’t do squat, and have really low life satisfaction. And these are the self-motivated and successful types that got into grad school in the first place. The grad students that do get something out of it, and report high life satisfaction are the ones that treat it like a real job where they simulate (or have an advisor who simulates) a job-like setting. And even they go through idleness ruts.

Dan S February 5, 2014 at 12:33 pm

Does anyone have any good behavioral tricks to overcome this? I can’t tell you how many times I’ve found myself looking forward to a nice, open Saturday, thinking of what nerdy enterprises I’ll get done that day, and then….what the heck how is it 3:00 already???? I’ve done nothing!

A Definite Beta Guy February 5, 2014 at 1:06 pm

Yes. Get a wife.

Frederic Mari February 5, 2014 at 1:14 pm

LOL. So true. Let alone kids… Then you do nothing [well, nothing for yourself, that is] but you know why…

Turkey Vulture February 5, 2014 at 2:05 pm

Didn’t work. She’s like me in this regard, so it actually may make it worse.

msgkings February 5, 2014 at 2:10 pm

Frederic is right, TV, it’s the kids that do the trick.

Turkey Vulture February 5, 2014 at 2:15 pm

I’m still new to child-rearing, so I haven’t had the chance to see the behavioral effects yet. But sometimes I post comments on the internet while holding a baby, when I might otherwise post comments on the internet without holding a baby. This could be an increased work ethic.

msgkings February 5, 2014 at 2:20 pm

Well now a ‘nothing Saturday’ is actually ‘a day keeping a little human alive’. So it’s not nothing.

JWatts February 5, 2014 at 6:49 pm

“But sometimes I post comments on the internet while holding a baby, when I might otherwise post comments on the internet without holding a baby. This could be an increased work ethic.”

It might or might not be an increased work ethic, but it’s certainly drastically increased your output. Because, generally speaking, holding a baby entails occasional diaper changes, fixing bottles, feeding the baby, burping the baby, cleaning up where the baby spit up, changing the babies clothes, rinse, wash and repeat.

Note to those that haven’t had babies, “spitting up” occasionally resembles projectile vomiting.

Turkey Vulture February 5, 2014 at 9:18 pm

This little dude loves his spitting-up-that-resembles-projectile vomiting. And he’s great at quickly shifting position right before he does it, so it ends up on my shirt rather than a burp cloth. Luckily I mostly work from my basement, so my gradual loss of any non-stained shirts isn’t such a big deal.

Nate February 5, 2014 at 1:45 pm

Yea, pop an adderall.

Shane M February 6, 2014 at 1:37 am

TV, I think it largely speaks to the lack of meaning that today’s work brings to most people. Most of us have more than we truly “need” (of course we almost always will want more), but there is a disconnect between the effort many put into their job and the satisfaction they derive from it. Sometimes it’s difficult to understand if you’re even doing something useful except via the money you get. It’s not like farming where you plant seeds and see them grow. Many look at their job and wonder if their job disappeared, would it matter at all?

This is not to downplay that there may be value there – but for many workers it’s difficult to see or appreciate the connection.

Brian Donohue February 6, 2014 at 8:53 am

Even if this is worst case scenario, it’s important to DO SOMETHING.

Yes, life is a struggle. And the modern challenges are different. Wind back the clock and tell your tale of “But, what does my job mean?” to a 19th century audience (weren’t we mostly farmers then?), though.

Sally forth!

Turkey Vulture February 6, 2014 at 3:32 pm

Hell, my parents were both born on farms in the 1950s. Things have changed quickly. But it really does seem to be true that when the immediate connection between work and survival is severed, questions about “what is the point of what I do?” bubble up a lot more.

Existential angst in the midst of abundance. We humans are screwy creatures. But we didn’t develop surrounded by abundance.

Marie February 6, 2014 at 3:25 pm

You bring up very important points about the ethics of work.

We have an obligation to give a dollar’s value for a dollar’s pay, and when we don’t do that we are anxious and the good of work can be lost on us.

Busywork does not confer dignity. The work must move the ball down the field, even if it’s just by a very little bit.

Unfortunately, the complexity of the system means it is often difficult to see the good we do — you may be producing something very important to some niche you simply cannot see.

Normally, the price system is, in fact, not just handy for economic systems but also for ethics. You know you are giving a dollar of worth for a dollar of pay because, well, that guy just gave you a dollar. But the extreme distortion of the marketplace that government intervention and monopolistic activity creates makes it really hard to use this method. As an example, I worked in communications for a nonprofit once. Essentially, my job was to write material that would lead to governments giving us tax and lottery money to pay my salary. In my case, using the money paid to me as a yardstick to measure the usefulness of my work would have been inappropriate.

Widmerpool February 5, 2014 at 12:13 pm

Excellent Brian. Thank you. And speaking as a non-economist, this also illustrates (yet again) why I think economics as a discipline is so poorly equipped to shed much light on these sorts of questions. Or, perhaps to be fairer, at best no better positioned than many other disciplines. It’s preeminence in policy discussions is misplaced.

Urso February 5, 2014 at 1:01 pm

I don’t disagree, but I think this assumes that most people are doing something invigorating and meaningful, or at least challenging and interesting, at their jobs. Which is probably true for you & I, not true for the large portion of the population who spend their time stocking shelves or stamping drivers’ licenses at the DMV. But even that might be more invigorating than the next most likely alternative (Judge Judy matrathons?)

It brings to mind an article I read about a financial advisor who worked with retiring pro athletes. He said whenever he asked what their post-career plans were and they said “go hunting & fishing” that was a huge warning bell. Because these guys are retiring at 30, and they need something to fill up the next 30 years. Going fishing every day gets old after a couple months.

Tigercat February 6, 2014 at 4:27 pm

So, my guess is from your post and this article that they would be better off working shifts at Wallmart or cleaning the grease pit at the back of a fast food restaurant to truly savor the feeling of purpose and ward off the depression they might experience. Geeze. No-one is doubting that people need to find a purpose for themselves–I really believe that people are capable of making those decisions and choosing to leave one’s low-paid job does not mean they will become depressed heroine addicts.

Urso February 6, 2014 at 7:34 pm

I would ask you to reread my first paragraph, but it seems presumptuous to assume you read it the first time.

Mondfledermaus February 5, 2014 at 4:47 pm

Work is a biblical curse, it says right there in Genesis, you are not supposed to like it. I certainly don’t, but I need money and I am to nervous to still and too jelous to pimp.

revver February 5, 2014 at 6:02 pm

Actually work was turned into a curse after the fall of man, God started giving Adam tasks (name the animals, tend the garden) right after he created him.

JonFraz February 5, 2014 at 7:36 pm

A large fraction of the drop-outs are likely to be married people, often with kids, who are working just to keep the family insured. There’s no definition of “idle” which can apply to a full-time homemaker and parent. I had an “unemployed” mother back when such were common; she did not spend her days eating bon-bons and watching soap operas– I made sure of that.

uffs February 5, 2014 at 8:28 pm

The CBO says so but of course we’ll not talk about that since it is somehow non-economic to ensure the continuation of our species.

Brian Donohue February 6, 2014 at 9:00 am

OK, some people here are talking about individual life experiences for individual human beings, not the ‘sci fi’ motif you’re imagining.

Brian Donohue February 6, 2014 at 8:56 am

To the extent that this is what is happening, I agree there is an upside.

But how large a fraction? I have no idea.

leftistconservative February 7, 2014 at 10:32 am

voltaire was born rich, of nobility, and mankind would have been better served had his neck been food for the guillotine, like his rich peers.
“Let them eat minimum wage…”?

Turkey Vulture February 5, 2014 at 12:00 pm

The immediate spin that this is a good thing – because every single thing resulting from the ACA must be a good thing – has really pissed me off, more than usual partisanship.

I’m not sure why exactly. I’m not a Democrat or Republican. I think the ACA is badly designed to achieve its stated ends, and that it will have a lot of negative consequences – such as reducing labor supplied – which will outweigh its supposed benefits. But I have no stake in the game – I wouldn’t mind being proven wrong. I just think if a report came out saying that the ACA would increase labor supplied, particularly by low-wage workers and workers near retirement, the same people saying the lowered labor supply is a good thing would be saying the higher labor supply is a good thing.

Yancey Ward February 5, 2014 at 12:20 pm

You don’t have to actually wonder whether they would say the latter thing- they actually have stated just that when the bill was being crafted in Congress- it would cause more people to get jobs.

CWill February 5, 2014 at 12:25 pm

What? That makes no sense at all. More people having jobs is not the same thing as an increase in a labor supply. A decrease in a labor supply can mean more people having jobs – more jobs can mean more people having jobs – an increase in the labor supply and a steady rate of available jobs would lead to a decrease in jobs. You are not proving anything at all.

XVO February 5, 2014 at 1:37 pm

“an increase in the labor supply and a steady rate of available jobs would lead to a decrease in jobs”

It would lead to the same amount of jobs, it would lead to an increase in the unemployment rate, assuming people are unable to create their own work. I think that some of those people looking for jobs would be able to create their own work, it’s not a zero sum game after all.

Turkey Vulture February 5, 2014 at 9:21 pm

Below I cite White House and Congressional selling points related to the ACA, from back around the time it was being passed. They state an increase in labor supply as an expected benefit of its passage.

The Other Jim February 5, 2014 at 12:55 pm

It is infuriating.

Remember, starting in January 2009, massive unemployment was a good thing because everyone got to spend more time with their families. Also they saved fuel by eschewing vacations. Now, thanks to Obamacare, people will become even less employed, which adds to the joy.

Nobody really even needs money any more, thanks to Obamacare. For just a couple dollars a day, you can get a plan with a 5-figure deductible, and there might even be a couple doctors in your plan. The taxpayer gets soaked with the premiums, so everybody wins, really!

Nate February 5, 2014 at 1:35 pm

Who was saying “massive unemployment was a good thing”? I don’t recall hearing that at all.

msgkings February 5, 2014 at 2:19 pm

That one is pretty rich.

Mike February 5, 2014 at 2:43 pm

There were definitely stories about “funemployment”.

msgkings February 5, 2014 at 2:58 pm

Those were inevitable human interest stories about people trying to make the best of a bad situation, not libruls loving bad economic times. At no time was anyone, anywhere, saying ‘massive unemployment was a good thing’. Sheesh.

The Other Jim February 5, 2014 at 3:54 pm

>There were definitely stories about “funemployment”.

Exactly right. And do not forget the odes to the “staycation.” It saves the planet from its terrible fever! Yay!

Down the memory hole it all goes. Much better for you all to ignore my point, and tut-tut on my hyperbole. That’s just so very helpful.

We’ve got a US President encouraging US citizens to NOT work. We have the US Media foregoing its job and instead telling us that this is great, because after all, the US President is a Democrat. You cannot defend this.

Jay February 5, 2014 at 5:35 pm

Isn’t he just retroactively applying the current logic being used for the CBO report?

derek February 5, 2014 at 11:06 pm

I don’t recall hearing unemployment mentioned during the Democratic convention. Seems government subsidized birth control for middle aged college girls was the pressing issue of the time.

mulp February 6, 2014 at 1:49 am

Only Republicans were seeking to increase unemployment.

Democrats were campaigning to deliver higher paying jobs.

Jay February 6, 2014 at 12:00 pm

@Mulp

How is life as a hyper-partisan? You’re making the discourse so much higher level and I fear you actually may believe statements you make here.

Michael February 5, 2014 at 1:52 pm

At some point, you think these folks would be embarrassed, but even the NYT article Tyler linked to yesterday was going out of its way to carry this particular bucket of water.

It's Over February 5, 2014 at 7:57 pm

I’m with you. I have no strong feelings either way on this issue, but I have noticed the follwing arguments from the Left:

Pre-ACA: We need this to provide healthcare to millions of American who can’t get it now!
Post-ACA: So what if millions of people are losing their coverage now, those policies sucked anyway!

Pre-ACA: We need this to make it easier for employers to hire workers!
Post-ACA: So what if this reduces employment, those jobs suck anway!

Hilarious.

Dave February 5, 2014 at 12:02 pm

When I saw people trying to spin this as good, all I could think is how loudly they would be cheering if the CBO study came back with a gain of 2-2.5 million workers.

Turkey Vulture February 5, 2014 at 12:07 pm

JINX. You owe me some meth.

David Wright February 5, 2014 at 12:17 pm

In a hypothetical world where a bunch of people are offered something which they are free to accept or reject and which doesn’t cost the rest of us anything, then one should cheer whether they tend to work more or less then before, since either way they are presumably on a higher isopreference line. My concern is that this particular something is not voluntary and costs the rest of us a bundle, so it’s not clear that it’s making them better off and it is clear that it’s making the rest of us worse off. As such, I am opposed regardless of whether they tend to work more or less afterward.

Marie February 5, 2014 at 12:09 pm

I’ll point out again the possibility that people are mis-analyzing this.

The right (reference Brian Donohue above) seem to see this as a bunch of folks tearing up their time cards and running off to the bars to celebrate their new found ability to leach off society. They will spend all day smoking pot and watching cable. No news on how they are paying for the pot and the cable, but the fear is a new federal program will cover that soon.

The left seems to think the same thing, they just aren’t mad about it. Lots of people with no interest in doing anything productive for society that now get to not do anything productive society, and good for them.

You know what both these POVs have in common? The ability to lay the responsibility for this mess at the feet of the poorest, least powerful, least influencial Americans, the ones who had no say in ACA and who may very well not support it, but who have to live with it, as most of the commenting parties don’t have to.

It’s a diversion, guys. Don’t fall for it.

Brian Donohue February 5, 2014 at 12:17 pm

Dude, you wrong me. Not a freeloading issue. My main concern with people not working is NOT that I’ll have to pay for them.

I didn’t mention blame or responsibility, but now that you mention it, I blame policies that encourage people to indulge their natural sloth. It’s not good for them.

Marie February 5, 2014 at 12:27 pm

I very much apologize, I actually skipped over “not” in your comment.
Shame on me.

I do still maintain that the right is getting grifted here, there’s been a number of stories out that are subtly shifting the focus from ACA to the people who have been forced (not encourage) to use it.

babar February 5, 2014 at 12:47 pm

if you could make healthcare a lot cheaper, it would have the same effect, so i take it you want it to stay expensive?

Brian Donohue February 5, 2014 at 1:06 pm

No. The wolf at the door is a motivator, no doubt.

But idleness can be a problem for the rich too. I’m not sure what the cure for affluenza is, but I’m open to ideas.

Urso February 5, 2014 at 1:29 pm

More solved this problem in Utopia by having the intellectual class spend every six months doing manual labor in the fields. Of course this was also true in Stalinist Russia.

JWatts February 5, 2014 at 6:56 pm

“if you could make healthcare a lot cheaper, it would have the same effect, so i take it you want it to stay expensive? ”

No, in that case the rest of us wouldn’t have to pay for it. That’s a rather big difference.

SB in StL February 6, 2014 at 11:56 am

“No, in that case the rest of us wouldn’t have to pay for it. That’s a rather big difference.”

Agreed that it does suck that we the “makers” must pay for these leaches to quit their jobs, stay home, and roach healthcare off the ObamaSystem. But…maybe, just maybe, someday you or I or Prof. Cowen or some other “captain of industry” will be laid low, temporarily or permanently unable to continue practicing our wonderful habit of work work working all day long, and will want/need to be jobless for a time. If that should happen, I suspect you or I would both appreciate continued access to medical insurance– in effect becoming the leaches we now so righteously decry. In appreciation of that very real possibility, I will refrain from further admonishing the ~2M of my countrymen that may leave their jobs and become wards of the ObamaSystem, and thereby avoid rendering myself a terrible hypocrite if/when that day comes for me.

Thanks,
SB

Jay February 5, 2014 at 5:38 pm

Are you saying those downtrodden workers voted R/D in the previous election 50/50 down the line? I would argue they have just a little fault in the emergence of this thing for voting the authors in in the first place.

Marie February 5, 2014 at 7:38 pm

Well, you can make that assumption.

I guess it’s time to totally give up on the right in this country. The left has won, they pull every string.

derek February 5, 2014 at 11:09 pm

No, they are pushing every string.

Marie February 5, 2014 at 11:25 pm

Had to look that up, but then I laughed!

acarraro February 5, 2014 at 12:14 pm

I thought most conservative economist would want to break the link between health insurance and full time employment. Wouldn’t any system that breaks this link suffer from a similar supply side effect?

Turkey Vulture February 5, 2014 at 12:22 pm

They want to break the link between any particular job and health insurance/care. Not between employment at all and health insurance/care.

And the simplest way to break the link is to eliminate the favorable tax treatment of employer-provided insurance. If the goal is to break the link, the various provisions of the ACA are a terrible means to achieve that end.

Yancey Ward February 5, 2014 at 12:22 pm

Again, see my comment to rayward. There is breaking the link between employment and health insurance, and breaking the link between a particular job and health insurance. They aren’t the same.

Yancey Ward February 5, 2014 at 12:23 pm

Now you jinx me.

Turkey Vulture February 5, 2014 at 12:24 pm

Meth is a hell of a drug.

Ryan Muldoon February 5, 2014 at 12:16 pm

I think it’s not quite right to look at reservation wages and health benefits equivalently.

Let’s imagine that I’m a newly minted college graduate, and I am holding out for a better job (maybe in part because of the overwhelming evidence that my first job dictates my future wages for my entire career). I might want to wait for a better job so I don’t get stuck in a lower-tier job than I take myself to be qualified for.

Similarly, if I’m mid-career, and lost my job during the Great Recession, I might also be wary of taking a step down in my career path, because that just cost me years of effort advancing to where I did. Perhaps I underestimate my search costs for a new position. But still, I want to hold out a bit,

Both of these are cases of where the job market is anemic, and perhaps I could be gainfully employed if I just ate some pride, but I remain unemployed. This is bad for the economy (and me personally). We might want to argue about ideal policy prescriptions, but it sounds like the goal is to improve job matching somehow.

However, if I’m, say, in my mid to late fifties or early sixties, and I have some health issue that makes me expensive on the individual market, I have to keep with my job, even if I hate it, because I need the health insurance. Maybe I’d rather start a consulting business, maybe I’d rather work part time, maybe I’d like to volunteer at the local school. Maybe I just want to go fishing and live on my savings. But pre-ACA, I was stuck. Post-ACA, I’m happily choosing to leave my job, which I take to be beneficial for me, even if it might reduce the total economic output of the economy.

If we are measuring welfare changes, those first two cases I describe have welfare-decreasing consequences, and this last case is welfare-enhancing (unless I was really really productive in the job that I hated and wanted to leave if I had been able to). Put more bluntly, the first cases involve me wishing for a larger choice set, and the last case is one where the choice set has been happily expanded for me. So isn’t it easy to say that the first cases are lamentable, and the last case is good? With the ACA, we’re expanding the available choice set to the labor force, providing easier conditions for them to start small firms or take on more flexible working environments. They can do this because they’ve been relieved of the burden of health disasters. Presumably, if those jobs that the people are leaving are contributing real value to society, younger, healthier people can take them up. While I haven’t looked carefully at the report, I assume some of those numbers are driven by the fact that we have a bulge in population around people who are at or near retirement age.

To make the argument that I seem to be seeing from conservatives, you have to claim that by expanding people’s labor market choices, and allowing them to make decisions that they take to be best for themselves in their situation, we have done something wrong. Which is surprising. I thought that we were supposed to like it when people had more control over their labor. The argument Tyler proposes is that in both cases, people don’t know what’s in their (long term) self interest. Does this then give government license to restrict their choices until they do what government deems is best for them? That doesn’t sound terribly liberty-enhancing.

David Wright February 5, 2014 at 12:26 pm

The argument you’re hearing from this fiscal conservative is that it’s not “liberty-enhancing” to make me pay for these people’s increased choices. (And even setting aside wealth transfers, while the particular actors under discussion here the ACA is choice-enhancing, for other actors it is choice-restricting.)

Ryan Muldoon February 5, 2014 at 12:39 pm

If you’re setting aside wealth transfers via the taxes and such, where is it choice-restricting? Presumably you mean in your inability to buy insurance products that are lower-quality than “bronze” plans? I suppose my response would be two-fold. First, literally every insurance product from 2009 was grandfathered in (hence the ill-put claim “if you like your insurance you can keep it”), it was just that insurance companies themselves chose to change those plans, and then new plans have additional restrictions. Second, I put this along with restrictions on not being allowed to buy toasters that might set your house on fire or hugely energy-inefficient light bulbs. A small restriction on liberty that doesn’t do much in the way of impacting my ability to choose my own plan of life. I’ll trade these small restrictions on liberty to gain the much bigger gains in liberty that do impact whether an actor can freely choose his or her plan of life.

Or perhaps you are thinking of something else, in which case I don’t know what you’re thinking of. My apologies.

Urso February 5, 2014 at 1:22 pm

Did you really just compare Obamacare to UL approval for toasters?

Turkey Vulture February 5, 2014 at 2:02 pm

Yes, with the house-fire-starting toaster being analogous to health insurance that doesn’t cover acupuncture.

Ryan Muldoon February 5, 2014 at 3:02 pm

I did compare having restrictions on health insurance products to restrictions on other kinds of good and services that are on the market, yes.

I am more than open to a discussion as to whether the particular bundle of requirements are the optimal set. But that there are restrictions to a health insurance product is not unlike the (heavy!) restrictions we place on toasters, or other insurance products, or investment vehicles, etc.

Admittedly, considerations for an insurance product are made more complex than just toasters precisely because there is a need for a functioning insurance pool. If we assure that people can’t be denied coverage for pre-existing conditions, we can’t just have it be possible to not buy insurance until you need it. That kind of undermines the concept. But if you’re open to regulation of goods and services provided on a market, then there shouldn’t be an in principle rejection of insurance products being regulated – we can just negotiate a bit about what those regulations look like.

Urso February 5, 2014 at 3:39 pm

Certainly you don’t suggest that, prior to the PPACA, health insurance was an unregulated market?

Immolate February 6, 2014 at 3:34 pm

@Ryan Muldoon
No, the specific requirements of the health insurance products are equivalent to requiring that people buy a toaster, and a microwave, and a can opener, and a dishwasher, and a stove, and a garbage disposal, and a trash compactor, and a refrigerator, for their bathroom.

Phill February 5, 2014 at 3:29 pm

If you equate “liberty” with pareto optimality, then sure. But that’s a silly, awfully restrictive view of liberty and democracy.

In the meanwhile, it seems straightforward to me that this has increased net utility. People who don’t want to work no longer have, leaving those jobs for those who need them above and beyond healthcare premiums.

T. Shaw February 5, 2014 at 12:18 pm

Sounds like the progressives’ spin on ACA death panels.

First: “Never happen.”

Subsequently, “It’s a good thing!”

They had to pass the ACA bill to see what would happen.

Mark Twain, ““Suppose you were an idiot. And suppose you were a member of Congress. But I repeat myself.”

Ryan Muldoon February 5, 2014 at 12:53 pm

What death panels? Can you point to any real death panel (which I assume is supposed to mean some government panel dictating who gets live and die) in the US? And can you point to a progressive pundit saying how that is great?

My understanding of the “death panels” controversy is that it came from two different policies, both of which sound perfectly reasonable. One, it covered (and because of controversy, no longer does) meeting with one’s doctor to talk about end-of-life planning. For some terminal patients, they would rather just let themselves pass, others want everything possible done to keep living. If they don’t make their preferences clear, it’s up to family members, who may well keep someone living in pain much longer than they would themselves like. Having insurance cover this meeting with a doctor allows people to clearly state what they would like. Nowhere in the initial bill did it require that doctors counsel people in a particular direction. To me, it is a big loss that this is no longer present in the law. People should be able to think through their end of life choices and do what is best for them. This relieves family members of hard, stressful choices, and allows people to die with dignity, however they personally define the term.

Second, “death panels” have been interpreted as the Medicare Advisory board, which is a panel of experts whose aim is to assess the evidence on the comparative effectiveness of different medical procedures, so that can inform what Medicare covers. This is an attempt to better aggregate information on outcomes, and determine best practices in medicine. It has nothing to do with whether particular individuals get access to care. It is about whether hospitals can keep charging high rates to perform a procedure that does less well than some other procedure. Again, this just sounds like a reasonable policy. Perhaps this is where you hear progressives calling what you take to be death panels a good idea. On top of this, built into the law, Congress can reject the recommendations of the panel if somehow they devolve into some strange group that’s aiming to murder off our grandmothers. Say what you want about Congress, but I’m pretty sure they don’t think they win elections by sanctioning the murder of nice old ladies who vote in disproportionately large numbers.

So again, I don’t know what you mean by death panels.

Michael February 5, 2014 at 2:03 pm

The IPAB, if it works as advertised, will mean removal of funding for a number of Medicare procedures. Also note that most insurance reimbursement rates move in lock-step with Medicare RVUs, so the effect is much wider than simply Medicare.

“Death Panel” may be a little hyperbolic way of phrasing the effect, but no more so than the myriad little phrases used to sell this particular law.

Ryan Muldoon February 5, 2014 at 2:17 pm

Hi Michael,

Yes, it will remove funding for procedures. But the criterion for removal is that those procedures don’t work very well, or are more costly than comparable alternatives. So why is this bad? This is a mechanism for driving down long-term cost growth in a sector that has traditionally increased in cost at a much higher rate than other segments of the economy.

The standard rightwing claim (as I understand it) is that death panels assess the productive value of the citizen, as to whether we should invest resources in his or her recovery. This is false, and a lot more than a bit of hyperbole. The true state of IPAB is to help get large amounts of data on comparative effectiveness of procedures, and use that to direct scarce resources to most effectively help people. Under this approach, it’s entirely plausible that we could help more people with less money. This is rather different than the claim about killing off nonproductive citizens. It aims to solve a serious information challenge in medicine – if I’m a surgeon in Wisconsin, I don’t know what the success rate of a given procedure is in Kentucky. By collecting this information, and using it to determine effective treatment methods, doctors can do their jobs better, and we can save money while doing it. People who feel strongly about wanting a particular procedure are still free to pay out of pocket. (Though I freely admit that this is a freedom that has little real value.)

It’s hard to both believe that there are structural inefficiencies and waste in a government program such as Medicare, and that it would be wrong to implement procedures to systematically reduce those inefficiencies.

Michael February 5, 2014 at 2:31 pm

There is a major misunderstanding when it comes to healthcare funding that procedures fall into two distinct categories, those that “work” and those that “don’t work”. Obama’s comments on this matter fall squarely into this fallacy.

Now, the reality is much more cloudy than that. Let’s say a procedure has a 20% efficacy rate. Is that good? Should it be funded? It really depends on the context, alternative treatments, sub-populations, etc. The problem is that Medicare reimbursement doesn’t allow for many of these complexities, and the way the law’s proponents (including Obama himself) have framed it, we will simply zero out funding for that particular procedure. But, in that case, then quite possibly, the 20% it was previously effective on will be harmed. “Die” in the parlance of certain politicians. Not subtle, not not exactly wrong, either.

Now, I don’t like the arguments around “Death Panels” for another reason entirely, basically because I think the IPAB simply won’t work as advertised. We already have a Medicare Advisory board that sets and adjusts rates, and they have to meet certain pre-established rate cuts (the SGR). The new healthcare law simply takes these mechanisms and gives them a slightly different names. The one innovative feature is the congressional supermajority needed to override the new SGR. The problem is that this feature is a) easy to sidestep, b) possibly unconstitutional, and c) based on historical votes on the SGR, an easy threshold to reach.

So, the bottom line is that Congress will probably override the much-vaunted “cost savings” in Obamacare. The cuts they do let through won’t be zeroing out of entire ineffective procedures, but look more like across the board rate-cuts that we’ve seen in Medicaid, resulting in even fewer docs willing to take patients, longer waits and Medicaid-like shortages. Hardly a win for the law’s proponents.

Michael February 5, 2014 at 2:43 pm

What the “Death Panel” phrase inelegantly boils down is a fundamental question of how the cost savings everybody says the wants should be achieved. The “ACA”‘s defenders feel those decisions should be made by politicians and bureaucrats via a combination of definitions of mandated coverage levels, and panels such as the IPAB. A free-market conservative feels that individuals should make those decisions on a case by case basis themselves, via market-based mechanisms (enabled by grander HSAs combined with stripped down catastrophic care plans or whatever).

The “Death Panel” rhetoric sums this debate up pretty succinctly. It is a somewhat inelegant rendition of the law’s actual workings, but, compared to the “blood on their hands” rhetoric of Pelosi and her ilk, frankly not that egregious of a misrepresentation.

Ryan Muldoon February 5, 2014 at 3:25 pm

Dear Michael,

(Sorry – I’m unable to directly reply to your comment for some reason)

I totally agree with you that we could (in many areas) make improvements when we think more carefully about success rates in the general population, versus discernable sub-populations. I’m not up on whether this is an issue with how things are being conducted in the IPAB or not. But if this is an issue, then I’m more than happy to agree that this should be corrected. This is also an issue with FDA approvals of drugs, as I understand the issue. But this is a fairly easy technical fix, not an in-principle problem. It’s not as if there aren’t standard statistical techniques for identifying sub-populations.

I disagree with you a bit on what was the pre-ACA status quo. A big part of the new law is getting the comparative effectiveness data in one place, which previously wasn’t the case. Even that is a massive gain for medicine, in my view, even if it ends up divorced from any payment decisions, as you seem to predict. My hope is that this is a process that can be made to work, but I wouldn’t be surprised if it required some adjustments along the way. Most new policies do.

I should be clear that while I definitely support the ACA, I’m open to making adjustments to it as evidence comes in. I’m also a big fan of the market mechanism, which is one of the reasons that I like the ACA – it, much more so than other approaches, tries to make a proper market out of individual insurance. It does so by improving information flows both at the level of procedure effectiveness with the IPAB, but also at the level of the point of insurance purchase for the consumer. I have insurance that is relatively unaffected by the ACA – it is employed-provided, it’s good enough that it easily met ACA requirements, etc. But though I think of myself as a pretty smart guy, I’m pretty far from an expert in medicine, and if I found myself to be sick or seriously injured, I doubt I’d be in a position to make informed consumer choices in the same way that I do when I buy normal consumer goods. There’s also less of an option for me to just not buy the product if I think the price is too high, if it means I’m going to die. We also live in a country of local provider monopolies, so shopping around accomplishes very little. So for those reasons, I tend to think that we aren’t going to be able to get anything approaching a free market in health care. I’m all for markets where they can be made to work. I like the ACA for trying to introduce market discipline where it can, so we can try and discover more effective treatment and delivery mechanisms. But it’s an imperfect law dealing with a class of goods and services that are structurally unfriendly to normal market mechanisms. So we should try and make tweaks as we can. You and I will just have to disagree about whether “death panels” captures our philosophical disagreements. I tend to think the phrase is unhelpful and designed to scare people. I also think that we’re a plenty rich enough country to ensure that people don’t go bankrupt or die because of some bad luck. So I think that the pre-ACA environment was morally unacceptable, and that with the ACA, we have made some improvements on that front, even if they are imperfect. But I appreciate that not everyone sees it that way.

CWill February 5, 2014 at 12:22 pm

Well, at least we are past the point of arguing that this kills 2 million jobs.

I think breaking out of your macro-economic fog and thinking about this in terms of the human beings that is effecting sheds light on the issue. Who are these people that will work less? In all likelihood they are people in their late 50s early 60s who want to retire early (possibly for health reasons) and want to retain health care. Another big section is likely people whose spouses own small businesses or work freelance or work as independent contractors – many of these people couldn’t get employer based health care under the old system, so their spouses got it for them – those spouses can now work less and devote themselves to child-rearing or other pursuits. Of course most conservatives will automatically assume that these people are lazy, good for nothings who just want handouts – and some of them certainly are. Your point about the rationality/irrationality of workers’ motives is well taken, but don’t assume you know better than these people do.

We should all be applauding the break between employment and health care – what seems to be happening here is people will make rational economic decisions about their future – and you know what? People can be rational about one thing and irrational about another. I also am not convinced that a unemployed worker holding out for a better job is necessarily an irrational decision – taking a worse job now may mean you will disqualify yourself for a better job in the future. Regardless, sometimes people are rational, sometimes they are not – I think it may be better to say that people are often rational about the present but irrational about the future.

Turkey Vulture February 5, 2014 at 12:54 pm

We should applaud the break between employment and any product or service which anyone might need or want. No one should have to work to get these things. All should be provided to them, and work be purely a choice of altruism or self-actualization.

prior_approval February 5, 2014 at 1:46 pm

So, how do you feel about educating children, then?

Turkey Vulture February 5, 2014 at 2:00 pm

As long as we educate them purely for the sake of knowledge, and not for any mean thing like supporting their desired lifestyle, then I approve of educating children.

JWatts February 5, 2014 at 7:21 pm

Indeed, trade schools are clearly evil.

Turkey Vulture February 5, 2014 at 9:29 pm

That’s why the shift of the top law schools towards appreciating true legal scholarship, rather than being mere trade schools, has been so important. I could have been forced to take debasing classes on the skills needed to practice law in order to get a JD, but instead I was able to fill my 2nd and 3rd years with “Law and X.” My intellectual development was stimulated, and I am not burdened with being employable as a lawyer.

Widmerpool February 5, 2014 at 1:15 pm

It’s all good! Not plausible that, despite your assurances and the current economic climate, the larger component of this group could be the underemployed who are just saying screw it I’ll stay home.

Stephen February 5, 2014 at 6:04 pm

As Reihan Salam’s been pointing out, this could lead to more women quitting their jobs and increasing the gender wage disparity. Is staying home with kids now a good thing for liberals?
This may also increase income inequality. Guess that’s ok now?

Jon February 5, 2014 at 12:28 pm

In assessing the value or lost value due to the disincentive to work, one must consider that for those who have conditions that make it difficult to insure their family in the private market the pre-ACA tying of health insurance to work creates an artificial benefit to employment. In some cases the high value of the insurance plus the wage (even if low) could be greater than the marginal benefit of working over not working.

I also wonder if the CBO factored into its study the fact that many exchange plans are inferior to those offered by large employers, especially in the size of the networks and lack of network coverage. This would blunt the force of the disincentives to work.

Hopaulius February 5, 2014 at 12:31 pm

The argument that the ACA is good because it severs the need for health insurance from the need to work strikes me as special pleading. Why not sever the need to work from the need for food, for housing, for clothing, for electronic gadgets, for transportation, from life itself? Moreover, isn’t anyone just a little concerned about the consequences of having all these people lower their output? How does an economy grow enough to support them?

Brian February 5, 2014 at 12:50 pm

I think the difference is that pre-ACA health insurance isn’t something you could just buy. To get our individual health insurance policy we had to apply and be accepted. Only after the insurance company agreed to insure us could we purchase a policy (that doesn’t happen at the grocery or electronic stores).

Mostly what the ACA does is put health insurance on a similar footing with other goods and services in the country. You still have to pay your premium, which for most people means having a job. You just no longer need to have the very specific kind of job that provides health insurance.

Dan W. February 5, 2014 at 12:53 pm

Brian,

Subsidies mean that the individual can work less and receive the same benefit. But someone is paying. What happens when “someone” decides he wants to work less too?

Brian February 5, 2014 at 1:17 pm

Yup, I re-read the comment you replied to and am certain it says nothing at all about subsidies.

Hopaulius tried to equate buying health insurance with buying other goods. My only point is that they’re not the same product. That’s true whether we subsidize things or don’t subsidize things.

P.S. Lots of stuff is subsidized – including food and pre-ACA health insurance.

SB in StL February 6, 2014 at 12:21 pm

Your argument might make sense if we had tight labor markets and supply-limited growth. But, last time I checked, there are still several million long-term unemployed Americans seeking a job, several million more who are “short-term” unemployed looking for a job, and several million who have effectively given up entirely. Many of those that are employed haven’t had much of a raise (after adjusting for inflation) in some 3-4 DECADES. The long term trend, thanks to globalization, technology, and the political choices of our gov-corp elites, is for exactly that which you decry–severing working from living as there is simply much more living than (human, american) working to be done. This little blip from the ACA will be as dust upon the mountain, so you should either a) get used to it, or b) start electing different leaders. Getting over the farcical “R v. D” paradigm is also necessarym, as Left v. Right is how the Top divides the Bottom.

Thanks,
SB

Brian February 5, 2014 at 12:41 pm

So the basic premise of this article is that people don’t know what is best for them?

Thomas February 5, 2014 at 1:21 pm

Why not read it the other way, and stop worrying about unemployment in response to demand-shocks?

Brian February 5, 2014 at 1:43 pm

You’ll have to help me out with that. The article sets up a “contradiction” between the unemployed who “irrationally undervalue the benefits of having a job and [who] also underestimate the costs of remaining unemployed” and the hopefully rational people who choose to work fewer hours in response to severing the link between health insurance and certain jobs.

Now this is only a contradiction if we assume that the unemployed are acting irrationally. If they’re unemployed not because they have too high a reserve wage but because there are too few jobs, then there is no contradiction. The rational unemployed want work but can’t find it. And the rational people leaving the labor force because of the ACA really know what is best for them given their circumstances.

It seems odd to argue the other way around. It also seems like the reverse is one for a larger nanny state rather than a smaller one.

(Not That) Bill O'Reilly February 5, 2014 at 1:44 pm

At the very least, when markets are distorted into making sub-optimal choices more attractive, many are unable to see past the distortions.

babar February 5, 2014 at 12:50 pm

if i could wave a magic wand and make healthcare intrinsically less expensive (say 1/3 the price. it certainly doesn’t sound implausible, if i could set prices) it would have the same effect – people could get it easier and so would probably drop out of the workforce earlier out of choice. is that not ok?

also, i’d like to know more about how they calculate that 2.5 m number – what are their assumptions?

Jay February 5, 2014 at 5:45 pm

To your first point, yes, but then we’d also live in a world with lower health costs and lesser costs being thrown on the shoulders of taxpayers. In OUR world we have the opposite and 2 million less workers contributing to society. You decide if they are the same world.

Brett Thomas February 5, 2014 at 12:51 pm

Is it possible that the worker’s perceived *choice* in unemployment is a part of their happiness? That being forced out of work, one (irrationally) undervalues work and overvalues the reserve wage, trying to get back one’s “just deserts”.

However, if one *decides* “Great I don’t have to do this crappy job, anymore”, that one can in fact be happy in the unemployment?

Much the same way that workers who retire aren’t all that unhappy, necessarily.

Dan W. February 5, 2014 at 12:51 pm

Hopaulius raises the two most important questions:

If we are not going to assign a personal cost / reward to health care then why do we persist in doing such for food, housing, transportation and and personal conveniences? And if people can work less and receive the same benefit is this because the benefit will cost less? If not then who is paying for it?

Urso February 5, 2014 at 1:12 pm

We kinda do, right? If you don’t work the gov’t provides you with subsistence-level housing & food. The fundamental debate here is what if anything is meant by subsistence-level health care? And the problem is that the potential answers range from “none at all” to “the best we can offer.”

msgkings February 5, 2014 at 2:27 pm

+1

David Wright February 5, 2014 at 3:04 pm

+2

JWatts February 5, 2014 at 7:26 pm

You actually raise a good point. If Obamacare plans were a much cheaper and barebones plan, then the law wouldn’t be nearly as objectionable.

Urso February 6, 2014 at 9:58 am

Ouch @ “actually” .

JWatts February 6, 2014 at 2:23 pm

Sorry, I didn’t mean it to come across that way. Sometime words that would be placeholders in speech take on a stronger meaning when written down.

Suffice to say, You raised a good point.

Matt February 5, 2014 at 12:53 pm

RE Douthat’s tweet, the fact that these projections go up and down by hundreds of thousands every time they are done makes me highly skeptical that any of them represent something real. I’m sure the CBO does the best it can with what it has, but let’s be straight: they have no idea what’s going to happen.

prior_approval February 5, 2014 at 1:43 pm

A point brilliantly made using traffic projections, as posted here just a few days ago.

CPV February 5, 2014 at 12:57 pm

Without some agreed on societal utility function to optimize over, these arguments are long-winded and time-wasting.

Turkey Vulture February 5, 2014 at 1:00 pm

That could be said equally for every public policy, right?

CPV February 5, 2014 at 1:12 pm

Rt. Some winners, some losers. Some output changes. Some deadweight loss maybe. Let’s try to actually quantify it, or come up with a framework for quantifying it. Problem is I don’t think anyone agrees about any of it, including the signs of the effects, or event the general scope and form of a utility function.

CPV February 5, 2014 at 1:27 pm

To clarify, these problems are unfortunately not amenable to treatment using techniques from micro-economics. So arguing about “income and substitution effects” isn’t that useful. I’d prefer that we give up trying to quantify these issues and focus on these issues as points of a of political philosophy. The pseudo-science isn’t working.

Turkey Vulture February 5, 2014 at 1:29 pm

I’ve always read that there’s no reasonable way to come up with interpersonal utility comparisons, which seems more or less right. Hard to compare the value of my being happy and your being really happy, even if we were twins.

So then I think public policy arguments should proceed something like this:

First general arguments about what we consider “good”: what our ideal society is, how it is best approximated, whatever.

But then, when a specific policy proposal is presented, take the presenter’s definition of the good life as a given. Find out what the precise goal of their policy is. Then analyze the extent to which their proposal will achieve their goal, given their premises about the good life. If a policy does a bad job of achieving the stated goals, taking the proponent’s idea of the good life as a given, then it’s a bad policy proposal.

Certainly breaking things up in this way would help to make discussions better. I’ve certainly made arguments relating to both points within the comments to this post without making an effort to separate them out.

Dick King February 5, 2014 at 1:12 pm

Wasn’t a large percentage of the CBO estimated FTE loss likely to arise from the high implicit marginal tax rate [over 100% in some ranges] from the rolloff of subsidies and even a cliff at the 400% level? Or are they hoping that people will stumble over the cliff unknowingly and only get gotcha’ed in early 2015 when they compute their taxes and discover that the subsidy they were expecting is gone?

Because of this cliff, there are people who should refuse raises [if they are taking subsidies and the raise puts them over the sharp threshold]. Refusing raises can be a bad idea because in many workplaces each year’s salary is the base for next year’s salary review, but refusing overtime or trimming hours is within the employee’s power, they may perceive it as not costing them too much in the next review cycle, and it can be modulated.

-dk

txslr February 5, 2014 at 2:10 pm

Exactly my understanding as well. I’ve been wondering when someone would point this out. Implicitly the defenders of the ACA on this front are saying that extremely high marginal tax rates on people at low income levels are great because they encourage them to avoid legitimate work. Hooray?

Downwardly Mobile February 5, 2014 at 3:20 pm

Right. The ACA thoroughly destroys upward mobility for the lower/middle classes. Perhaps ACA’s defenders think that’s perfectly fine because wage-lock will make the people in those segments more “equal.”

But I’d like to see them admit it out loud and watch them try to defend it.

We live in interesting times February 5, 2014 at 3:34 pm

Protecting their turf? Less competition?

Jay February 5, 2014 at 5:49 pm

A snarky right-leaning person would argue this has been the left’s goal all along. Middle class voters may vote for the other guy.

Benny Lava February 5, 2014 at 1:16 pm

1. All these hysterics over a CBO guess? Why do you believe that things will turn out exactly as the estimates say?

2. Won’t this reduce unemployment? Isn’t that a good thing? Is higher unemployment favorable? Is so, why?

prior_approval February 5, 2014 at 1:42 pm

‘Why do you believe that things will turn out exactly as the estimates say?’

Well, because of a deeply abiding faith in whatever supports their argument?

Which when it was examples of ridiculous government projections just a few days ago, the argument being just how untrustworthy government projections are.

Consistency has never been much of a hobgoblin here..

Turkey Vulture February 5, 2014 at 1:56 pm

1. A lot of the hysterics, or at least my hysterics, are in response to the reaction by certain people to the CBO guess – namely, their seemingly sudden espousal of the view that lower labor force participation is good, and that this was the intention of the ACA.

2. It will potentially decrease the number that we call the unemployment rate. It will increase the portion of the population not working, or decrease the number of hours worked. That would seem to be the relevant metric. A 100% tax on all income below $50,000 might decrease the headline unemployment rate too, but I don’t think it’d be a good thing.

Benny Lava February 5, 2014 at 7:38 pm

So you think having people voluntarily quit their job is a bad thing? Did you forget your meds today?

Turkey Vulture February 5, 2014 at 9:38 pm

Say you have a full-time salary of $40k. A tax law is passed that makes your tax liability $40k if you make $40k, and $0 if you make $0. You rationally and voluntarily choose to work 0 hours, because why the hell would you work full-time for no money?

Do you think that person voluntarily quitting their job is a good thing – a sign of a well-crafted public policy working its magic? Did you steal my meds?

Lee A. Arnold February 5, 2014 at 1:40 pm

None of this adds up. There may be countervailing tendencies: for one example, the release of job-lock may cause more people to start-up new businesses. “Krueger shows rather convincingly that the unemployed maintain reservation wages which are simply too high.” –In other words, everybody would prefer to make more money! This is something we needed an economist to tell us, apparently. But does it follow, as Tyler writes, that “They would be better off lowering those wages, being more realistic, accepting work, and getting back on their feet again”? No, that might just be a rat-trap. They might care to do something else to make more money on their own, instead of a dead-end service job. Or perhaps, two dead-end jobs: around 5% of the workforce is working two (or even more) jobs, just to make ends meet, including single mothers who ought to devote more time to their school-age kids, and thus make a better country with less welfare costs in the future for the rest of us. Of course we expect, by now, that the opponents of universal healthcare will come up with any and all reasons why a step in that direction is a terrible idea, all based upon nonsense about rational self-interest and laziness. And of course there is a lot of money at stake in getting candidates elected, and so making and publicizing this endless line of silly arguments is now a very big business. The latest kerfluffle is more of the same. But things also always work in the other direction too, and at the same time. An N-dimensional complex-systems approach is requisite to understanding the economy, and simple inferences will not suffice.

S February 5, 2014 at 2:00 pm

I don’t understand this notion of “stuck in a job just to pay X” is somehow bad when X = health care, but okay for all other X. Strange

NPW February 5, 2014 at 2:35 pm

I worked a lower paying job that had access to healthcare full time instead of higher paying work (that I was doing part time) for access to healthcare. My wife and daughter had too many health issues at the time, and paying health care costs independently wasn’t an option. Even getting any kind of of insurance was next to impossible.

bmcburney February 5, 2014 at 3:39 pm

But that wasn’t really a “lower paying job” given your situation. If the pay difference was high enough (net of taxes) to compensate for the cost of private insurance then presumably you would have taken the higher paying job. Post-ACA you are required to have insurance and some employers will be required to give it to you next year. On an “Apples to Apples” basis, you would now be required to take the “lower paying job” because the higher paying alternative no longer exists because everyone is required to have ACA-compliant insurance (not strictly true since the employer mandate has been defered and the higher paying employer might have fewer than 50 full time employees). No net change for you.

The point (as I take it) which S is making is that, prior to the ACA, a particular worker might value a nicer car, an earlier retirement, a nicer house or exotic vacations more than comprehensive health insurance. If so, that worker might take the higher paying job, give up the comprehensive health insurance, and live happily ever after. Post-ACA, this is no longer an option.

Downwardly Mobile February 5, 2014 at 3:45 pm

And soon every single lower and middle-class worker will be stuck in a lower-paying job — foregoing higher-paying work — so he can have access to healthcare through subsidies.

I sure hope you escaped in time, NPW.

Forward, march!

Marie February 5, 2014 at 6:30 pm

People are misunderstanding NPW’s issue, lack of portability does not mean you have to pay more or even a lot more for insurance.

It means you can be a multi-billionaire but you still could not buy insurance.

Individuals without a medical condition could acquire medical insurance either through an employer or through the private market. They also could feel free to leave one employer for another, or speculate on doing so, knowing that they could buy the product privately if need be.

Individuals and families with a pre-existing condition could only acquire insurance through an employer. If they had a present employer who insured, they took a big risk even looking for another position with another insuring employer since anything that risked the job risked their only available path to insurance.

Imagine if you belonged to a population that was only allowed to acquire food through a food-providing employer. Your freedom as regards your job would be significantly different than the freedom of those who could buy food at Walmart.

Fortunately, 36 states had already solved this problem by making private insurance purchasable through high risk pools. These plans were, of course, very expensive, but expensive is something you deal with in food, etc. also.

bmcburney February 5, 2014 at 8:01 pm

Marie, I believe your major premise is factually incorrect. Certainly, it is unsupported by NPW’s post. Although NPW says getting health insurance was “next to impossible” he clearly is not saying it was literally impossible. NPW is (understandably, given his situation at the time) complaining about price, not about availability regardless of price. Although people sometimes talk loosely of being “uninsurable”, the reality is that everybody is “insurable” at some price and under some terms. There are no multi-billionaires who cannot buy insurance (although in some cases an individual may not benefit financially from being able to do so). Moreover, the number of people actually “priced out” of health insurance pre-ACA was very small and jobs providing health insurance coverage as a benefit were not exceptionally rare.

In any case, S’s original point was that even someone in NPW’s situation is no more “stuck” in his job to get health insurance, then somebody else might be “stuck” in their job to get a company-provided BMW.

Marie February 5, 2014 at 9:32 pm

I don’t want to continue to presume to seem to speak for NPW.

There were state high risk pools that allowed individuals to purchase health care, at very elevated prices. Not every state had them, and they didn’t always exist. So NPW might very well have meant (although I have no idea) that in order to get insurance he/she would have had to move to another state and get a job that made enough to pay the high premiums. That would qualify as “next to impossible”.

There were also sometimes state workarounds — e.g. if you had a small business, the insurance companies had to sell you a group plan. But not everyone was qualified to set up a valid small business.

Other than that it was, indeed, the case, that there were certain conditions that you could not have and buy a private policy.
We had one of those in the family. It was a dead stop. It wasn’t “hey, if you want to pay us $5000 a month you can have insurance”. It was no, we don’t sell them, and no one else does, either. Period.

I think you are missing several of my points, of course someone with a pre-existing could switch to another company with insurance. I know for my family, the idea of a gap in coverage was unacceptable, so leaving one job to look for another or searching for the next job and therefore endangering the one you have, those were risks we would not have taken.

I am not an advocate of ACA, as I’ve said before, the solution was there already in the state pools. But I’m trying to point out that the comparison is not health insurance to BMWs, the comparison is health insurance to food. If you had to stay in one job with one company or risk your kids not being able to eat, you would be in a much different situation from the person who stays in one job at one company because it provides BMWs.

bmcburney February 6, 2014 at 12:08 am

Please just re-read what NPW actually said. There is no support for your position in his comments. There is nothing to suggest he would have to change states or start a business to get health insurance. He said getting health insurance was too expensive to allow him to leave his “low paying” job, he did not say it was unavailable. No gap in coverage will occur if you decided to switch jobs to another employer unless you quit one job before finding another but it is not necessary to quit one job before finding another, it is not even helpful. Yes, insurers can discontinue coverage but, although the price may be high and other terms unattractive, there is always another insurer to pick up coverage. Always. The real world just isn’t like the world you are imagining.

Health insurance is not like food, you won’t die without health insurance. Your kids won’t die without health insurance. They won’t even go without medical care without health insurance. Access to health care at some level is guaranteed in this country and has been since the Regan Administration. Health insurance exists to protect your financial assets, not your health or your access to health care. Health insurance is more like a BMW than something you need to live.

Marie February 6, 2014 at 9:43 am

The world I’m imagining, eh? Gosh, all those many hours over the last 6 years working with insurance agents, insurance companies, billing departments, COBRA, HR departments, it must have just been a beautiful dream.

Could you explain to me what your basis is for your assertions about reality?

bmcburney February 6, 2014 at 2:47 pm

Marie,

Sorry for posting this higher in the comment string but there was no reply button below your post.

In general, it’s a bad idea to try to compare qualifications or experience on the internet. Anyone can claim anything here. Nevertheless, since you asked, I have more than twenty years of experience in the insurance industry. Most of my experience is on the property and casualty side but many people I work with work in the health and disability field.

But you do not need my expert say so to know that what I said is correct. In fact, I suspect you already know it yourself. One major premise of your argument was that for some people, health insurance is not available at any price. The second major premise of your argument was that health insurance is like food in that people who don’t have health insurance will die. In the real world, both of these assertions are factually incorrect. You said that multi-billionaires with pre-existing conditions cannot get insurance, only in your imagination is this a true statement. You imagnine that health insurance is like food, something you must have or you will die. This is not true in the real world. People do not die without health insurance, overall (as we know from the Oregon study) they are not even less physically healthy. A lack of health insurance exposes people to financial risk, not to any significant health risks (except for a very small increase in stress-related problems probably resulting from their increased financial risk).

Marie February 6, 2014 at 4:35 pm

Yes, the reply system is a bit hard to navigate!

Can I suggest next time you talk to your friends you ask outright — pre-ACA, if a person was diagnosed with Type 1 diabetes or lung cancer, was that person able to buy a policy from your company if he or she was willing to pay a higher premium. I take your word for it that you’re in the field, and am surprised you’re unaware of this aspect. Also was surprised above you thought health insurance could be canceled for an individual policy, once you have the plan, state laws generally said they can’t be cancelled if you pay your premiums.

Here, look at the old information here, it talks about people being *prohibited* from buying insurance, or people *denied* coverage (as separate categories from people just being charged more). I’m not making this up, you’re missing a piece here. Ask your friends.

https://www.covercolorado.org/default.asp?contentID=679

As for the idea of insurance as asset protection, it certainly is that. I’ve said it here before myself. I have also myself pointed out that health care and health insurance are not the same thing, and that is accurate.

But your assertions are really out there, which is why it was particularly strange to see you joke that I wasn’t living in the real world. Certainly, if I don’t have insurance I can pay for services myself or with charity and get emergency services even if I cannot pay, and the ding is to my assets when the bill collectors come, if I have any assets.

But surely you don’t think that’s the end of the story?

I’m too anecdotal and long winded here, but let me indulge.

If I don’t have insurance, my kid won’t die. Soon, probably. That’s good.

But here’s what does happen.

She’s got a medical device that costs $3000 to $4000 retail, but which the insurance company got for half that, so my deductible and copays about paid for it.

Without the device, I need to test her glucose regularly to keep her blood sugar healthy. She’s little, so we need to check her two to four times each night, because a prolonged deep low can cause seizure, brain damage, and (very rarely) death. That’s called “dead in bed”, cute, huh?

We also need to check her bg easily ten times a day. These test strips cost $1 each retail (again, less if bought through insurance). There are less accurate strips, but if I give her insulin based on the wrong numbers I can give her insulin shock (possible hospital stay) or risk DKA (definite hospital stay), so we really need to keep to accurate strips.

If we go short on the tests, she risks a low. Less dangerous during the day, since she’ll probably pass out and we can address it quickly. But, you know, if she’s, like, in the pool or bath it’s more of an issue.

What is really an issue is highs. Every time her blood sugar goes over 200, the glucose does little bits of damage. If we don’t detect and correct highs she can easily rest over 400 for hours (nondiabetics don’t usually go over 100, even after a box of donuts). So limiting test strips means damage gets done, and the damage adds up. That means by adulthood she will probably start to develop what they like to call “complications” — diabetic neuropathy, gastroparesis, blindness, kidney failure — the fun stuff. If we keep her on these restrictions it’s real likely we’re cutting her life down into her fifties or sixties, with years of expensive and miserable care before death.

Now, if my kid has a seizure she can get ER care, or if she goes into DKA. Later renal failure, etc., same deal. But ERs don’t want you coming in daily for test strips. And we haven’t even talked about her insulin yet, or syringes (relatively cheap, but six to eight a day adds up), or emergency supplies.

I can pay for some stuff out of pocket, but the cost is pretty high because prices are messed up when everyone buys through a third party. So my retail prices are going to cost much more than my premiums for the insurance we had (before ACA ended it) cost.

And I can go on Medicaid, which pays for some stuff, and hope our savings on premiums will even out the new out of pocket costs.

But you’ve got to be kidding me if you’re saying my lack of health insurance doesn’t affect my kid’s health, or even her risk of death. I don’t care if you want to compare it to food or kidneys, or nothing at all. But don’t compare my access to health care products to BMWs. Seriously, don’t do that.

Just so you know, I know that it’s *not your responsiblity* that my kid has diabetes. There is no reason why you should have to take a hit because my kid got this condition. She’s my family, it’s our hit to take. If I have to sell my liver to pay for insulin, that’s not your fault or your concern, totally. Enjoy your BMW.

But I don’t have to take huge hits because she has diabetes, I have to take huge hits because she has diabetes *and* because she is a citizen of a nation that has decided to create (through federal intervention) an asinine system for paying for health care. If I were living in my grandmother’s time, I could look upon health insurance as cavalierly as you suggest I do. But I don’t, I live in today’s real world, and in today’s real world, my kid will have a rough and shorter life if we don’t have insurance.

Oh, and the Oregon study was about Medicaid. As you know, Medicaid is not insurance.

Marie February 6, 2014 at 4:35 pm

Wow, outdid my neurotic self there. Time to back away from the computer!

bmcburney February 6, 2014 at 6:40 pm

Marie,

Of course, some people have children with serious chronic illnesses and, like most people, I feel sorry for any parent in that situation. Assuming your story is true (and, sorry, I don’t actually believe it is true) I feel sympathy for your situation. But, even prior to the ACA, having a child with Type 1 Diabetes is not something which would have prevented you and your family from getting health insurance. Of course, a serious condition like that would have increased the cost of the insurance but, again, insurance would have been available to you at a price reflecting the expected costs of treating your family during the coverage period. Despite what “Covered Colorado” might claim, no one was ever “prohibited” from getting insurance. If your story was actually true, you would already know that.

Nor is health insurance like food. You don’t need health insurance to live or even to be healthy. Insurance, always and everywhere, is a financial product. Sorry, but having health insurance coverage won’t cure your alleged child’s alleged diabetes or make monitoring her blood sugar any easier. It won’t improve her health or make complications any less likely to occur. However, the ACA will tend to restrict her access to specialists and might make interruptions in her supply of testing materials more likely (we don’t really know for sure above that). The net affect of the ACA is to transfer money from the people that earned it to others. If your story is true, you are one of the others. Congratulations.

I am surprised that you said you are not an “advocate” of the ACA. Normally, when lefties say something like that what they really mean is that they advocate a single payer system. If your story is true, be careful what you wish for. If you think having a kid with diabetes is tough now, just wait until single payer comes in.

Marie February 6, 2014 at 6:58 pm

Enlightening, bmc.
Thanks.

bmcburney February 7, 2014 at 1:19 pm

Marie,

It was my pleasure to enlighten you. I noticed you fixed the comment string again, thanks. You must do this a lot. Do any of your other personas have children?

Marie February 8, 2014 at 12:18 am

Ah, I feel much better, I was taking your posts to heart, representative, etc.

You just think you’ve caught a troll, that explains the attitude to the discussion.

I shouldn’t ask, because you’ll just think I’m feigning ignorance as part of my scam, but it bugs me not knowing, what do you mean about the comments thread?

Last note, I wonder if your work in health insurance has been in the last year? Remember, ACA started implementing in 1/13. Two changes that were big then. First, young adults could stay on a parent plan. Second, insurance could no longer be denied to minors for pre-existing, although they could charge up to four (?) times the premium.

As of 1/14, they can’t deny to anyone and can’t charge more, which is part of why so many people (us included) saw their plans get drastically more expensive.

Maybe that’s where we’re talking past each other. But that was post ACA. If that was the confusion, and you start to think maybe I’m not a big liar, no worries. That’s the way the inter webs work! ;)

Now I’m off to wonder who here you think I am, hope it’s someone cool.

bmcburney February 5, 2014 at 2:06 pm

Can somebody help me out here?

I was under the impression that the CBO’s analysis was based on the observation that for some number of worker/hours (now estimated as amounting to 2.5 million full time jobs) the ACA would result in a combination of marginal tax increases, insurance premium increases and subsidy losses which would eliminate the net benefits of work for that population and cause them to reduce their contributions to the work force.

Although, by definition, the lost subsidy component would not exist but for the ACA, it seems very odd to re-imagine this affect as a net benefit to the affected population. I understand that, in the pre-ACA world, there must have been some people for whom the decisive value they receive from their job was a health insurance benefit. I believe, however, that for most people the cash “benefit” is the key attraction. I would also think that, considering where the subsidy cut-off falls, number of workers valuing cash above heal insurance in the affected group would be over-represented compared to the population as a whole.

How have we come to identify the tiny(?) minority of workers who regard their wages as a minor inducement to work as a stand-in for the group as a whole?

Donald Pretari February 5, 2014 at 2:09 pm

What about Immigration? And, yes, I’m actually asking a question.

Jimbino February 5, 2014 at 2:58 pm

The post asks, “In other words, would-be workers irrationally undervalue the benefits of having a job and they also underestimate the costs of remaining unemployed.”

This quote is big on false dichotomy. If I were the young single childfree male rocket scientist I once was, I would neither take a W-2 job nor remain “unemployed.”

I would never participate in Obamacare. Among the possibilities short of becoming Amish: I might look for work under a W-2 “unbenefitted” contract under a small job-shop free of the Obamacare participation mandate. I might consider work as a 1099 independent contractor and never leave money on the IRS table to be confiscated. I might form a corp and enter into a contract “corp-to-corp.” I might buy fixer-uppers, live in them sequentially each for 2 years, and enjoy the tax-favored (or tax-free) capital gains, also free of Obamacare. I might emigrate to a country like Ecuador or Brazil that actually appreciated my rocketry and nuclear design skills.

Boonton February 5, 2014 at 3:21 pm

How happy should we be about this? Pretty happy I think. The impact here seems limited to the person who is working simply for the sake of coverage and would be happier to either work part time (in exchange for coverage paid for partially with subsidies via the exchanges) or in states with Medicaid expansion to simply stop working entirely.

In other words, this sounds a lot like Tyler’s ‘Zero Marginal Product’ workers. The loss to the economy from them not working is going to be….wait for it….pretty close to zero. They are ‘zero marginal product’ after all.

On the flip side, though, how about the gain from the flexible worker entering the market? The worker who would rather work multiple part time jobs or do various gigs and purchase insurance outside of an employer….in other words breaking ‘job lock’ at least a little bit.

(Not That) Bill O'Reilly February 5, 2014 at 5:06 pm

Even if these workers are “Zero Marginal Product” workers*, there is still a loss to the economy in going from having them work for an employer who will pay for or subsidize their health insurance, to having said subsidy be socialized as a government program supported by the taxpayer. These people aren’t just being magically plucked from the labor force; they’re being given a monetary incentive to leave (or, depending on one’s framing, having a monetary disincentive removed), and that costs money that worker will definitionally no longer be creating.

*I don’t follow the ZMP conclusion one bit, by the by. If these workers are able to hold down jobs that pay for, or at least subsidize, their healthcare, the conclusion would seem the opposite, no?

Turkey Vulture February 5, 2014 at 4:09 pm

How about this:

Can somebody find ACA proponents, in 2008 or 2009, arguing that we would see this reduction in labor supply, for these reasons, and that this reduction in labor supply would be a good thing? In particular, an ACA proponent who is now spinning this CBO report as merely announcing the Good News. If so, I’ll stop being so angry about this.

Until that’s found, or if it can’t be found, then it should be pretty clear to anyone not poisoned by partisan feelings that the “labor supply shrinking is good” narrative is purely after-the-fact, partisan spin on what seems to be a negative side consequence of the ACA.

Herb February 5, 2014 at 4:54 pm

Who cares? There were no “ACA proponents” in 2008. There were some folks who wanted to reform healthcare…and there were some folks who wanted to see the long form copy of the birth certificate.

Once the ACA became a “thing,” the opponents told us there would be death panels. They didn’t say that 2 million people would decide to stop working a job they no longer need.

Turkey Vulture February 5, 2014 at 5:44 pm

Enjoy your blind partisanship. It is making America great.

Turkey Vulture February 5, 2014 at 5:47 pm

http://www.whitehouse.gov/administration/eop/cea/TheEconomicCaseforHealthCareReform

THE ECONOMIC IMPACT OF EXPANDING COVERAGE

The report identifies three important impacts of expanding health care coverage:

2. It would likely increase labor supply. Increased insurance coverage and, hence, improved health care, is likely to increase labor supply by reducing disability and absenteeism in the work place. This increase in labor supply would tend to increase GDP and reduce the budget deficit.

Herb February 5, 2014 at 6:19 pm

Once the hypocrites are exposed, then what? We stone them?

If there’s a problem, pointing fingers isn’t going to solve it. (And neither is complaining about other people’s partisanship.)

txslr February 5, 2014 at 6:29 pm

But what do you do when the supporters of the ACA insist that the problem is actually a feature? And then try to deflect legitimate criticism by invoking “birth certificates” and “death panels” (and can racism be far behind)? Or are we supposed to believe that the drafters of this legislation thought that labor supply was at a locally unique ‘bad point’ and anything that moved it either up OR down would be a net gain to society? If you combine what they said then with what they say now this is the only logical conclusion we can draw, and it is palpable nonsense. Or perhaps they are (and/or were) lying?

Turkey Vulture February 5, 2014 at 9:07 pm

When the problem is that people heap bullshit justifications into the public sphere just because they want to support Their Team, then yes, pointing fingers should help solve the problem. People doing this should be belittled as the partisan hacks that they are.

txslr February 5, 2014 at 6:20 pm

Ouch! That’s gonna leave a mark!

Turkey Vulture February 5, 2014 at 5:53 pm

http://www.dpc.senate.gov/dpcdoc.cfm?doc_name=fs-111-1-153

Not seeing anything along the lines of “the subsidies will allow people to exit the labor force or reduce their hours.”

Herb February 5, 2014 at 6:52 pm

Their crystal ball was dirty.

I don’t see what that has to do with your ability to think for yourself.

You knew there were people who took jobs only to get health insurance. You knew the ACA was going to provide them an alternative method of getting health insurance.

But it never occurred to you that they would leave the job?

txslr February 5, 2014 at 7:34 pm

Again, that isn’t the point. The major point that the CBO is making is that the subsidies create an effective set of very high marginal tax rates which in turn create strong disincentives to work. This is the opposite of what those who sold the legislation said would happen. It is, however, an outcome that many of those who opposed the legislation predicted. At this point it would be difficult to find a dimension along which the ACA is not failing, and there are strong reasons to believe that it is going to get much worse.

I’d note that when the ACA was bubbling out of the swamp there were alternatives offered that would have addressed problems with the old system – interstate sale of health insurance, decoupling employment from insurance by modifying the tax code, high risk pools for the uninsurable, etc. The supporters of the ACA insisted that we take the radical approach of entirely redesigning health care finance. What they built was absolutely the most invasive reform that they could possibly squeeze through Congress. Now that their program is failing they have become conservative, inviting everyone to pitch in to try to keep the monster alive. That isn’t going to happen, so perhaps ACA’s supporters should just give up and admit that they blew it.

Downwardly Mobile February 5, 2014 at 8:03 pm

Right on, txslr and Turkey Vult.

Here’s another predictable bit: The “Doctor Boycott” of Obamacare is no myth. Patients are discovering that numerous doctors listed by Covered California as “in network” on its exchange plans, are not in network.

http://www.latimes.com/business/la-fi-obamacare-patients-20140205,0,5417742.story#axzz2sTBi0PeH

@Herb, see Turkey Vulture’s link wherein Obama claimed ACA would increase the labor supply. Did you believe Obama back then, or … were you thinking for yourself?

Herb February 5, 2014 at 8:34 pm

“It is, however, an outcome that many of those who opposed the legislation predicted.”

But instead of making that argument, you guys went with death panels and “socialized medicine” instead…..well played, sirs. Well played.

(PS. No one cares that the president lied. It’s in his job description. Try this: Better arguments. I mean….points for effort, I guess, but if you want full credit, you have to move the needle.)

Turkey Vulture February 5, 2014 at 9:14 pm

Yeah Herb, everyone who opposed the ACA and opposes it now was either a Birther or yelling death panels.

Actually, I support death panels for publicly-funded healthcare. I don’t want to spend $500k of public resources on prolonging a 75 year old’s life for six months.

txslr February 6, 2014 at 2:43 pm

Herb – All of those arguments were made, you just choose to pretend otherwise. The strength of those arguments is why the people in the country opposed the bill and continue to. This, in turn, is why the Republicans opposed the bill almost to a man, and why the Republicans won big in the 2010 elections. Those who opposed the ACA won all the arguments. It just didn’t matter.

Herb February 6, 2014 at 3:57 pm

“All of those arguments were made, you just choose to pretend otherwise.”

Sure, they were. They either got drowned out in the BS (death panels! socialism!) or they were found wanting.

You pick.

Turkey Vulture February 5, 2014 at 5:55 pm

http://www.whitehouse.gov/administration/eop/cea/TheEconomicCaseforHealthCareReform

“Reform would likely increase labor supply, remove unnecessary barriers to job mobility, and help to “level the playing field” between large and small businesses.”

Carolus February 5, 2014 at 6:41 pm

I’m on social security. I love not having work and have someone else pay for my leisure. With diminishing marginal utility of income, we’re all better off that way. And, with the FICA taxes they pay, they work less too. So we’re all better off for not working so much. Thank you Congress for telling us what our marginal rates of substitution should be! We’re just too dumb to figure that out for ourselves, and that’s why we elected y’all. Go at it, tax and redistribute some more, maybe none of us will have to work any longer. Manna from Congress, don’t you just love it?

txslr February 5, 2014 at 6:59 pm

Exactly! Why shouldn’t everyone enjoy the gifts that are being heaped upon the projected 2.5m? Congress should raise all income tax rates to 110% effective immediately. Then we can all enjoy not working!

JWatts February 5, 2014 at 7:35 pm

Don’t be silly. What they should do instead is raise the minimum wage to $100 per hour. Then we can all be Above Average. ;)

txslr February 6, 2014 at 2:45 pm

Raise the minimum wage to the average wage and then tax at 100%. Then everyone is rich, above average and we will all choose to not work!

mwbugg February 5, 2014 at 6:52 pm

You guys should quit arguing and just read Kevin Drum. He explains things a lot more clearly:

“Why will Obamacare reduce employment? Because it’s a job killer? Because employers will push lots of workers into part-time positions? Because its taxes on the well-off will crater the economy?

No. Those effects are tiny at best. It’s much simpler than that. Obamacare will reduce employment primarily because it’s a means-tested welfare program, and means-tested programs always reduce employment among the poor…..

This is not something specific to Obamacare. It’s a shortcoming in all means-tested welfare programs. It’s basically Welfare 101, and in over half a century, no one has really figured out how to get around it. It’s something you just have to accept if you support safety net programs for the poor.”

Turkey Vulture February 5, 2014 at 9:10 pm

He’s right, but the argument is centered around this “shortcoming in all means-tested welfare programs” now being presented as a good thing.

Downright Immobile February 5, 2014 at 9:36 pm

After some nothing-to-see-here moves, Drum admits the conservative argument against welfare is in fact true: welfare programs keep the poor locked into poverty. You just have to accept that poor people will stay poor “if you support safety nets for the poor.”

Dang. He sounds like Ronald Reagan.

Jay February 6, 2014 at 12:08 pm

…and also when the EXACT opposite argument was used by proponents during its passage.

David Khoo February 5, 2014 at 9:23 pm

Is this really so hard to understand? The “goodness” of an event depends upon its reasons. If people were forced into unemployment because suddenly fire rained down from the heavens and burned up all the crops, that would be bad. If people were forced into greater employment because of the same reason, that would also be bad. Conversely, if people were forced into unemployment because manna rained down from heaven, that would be good. If they were forced into greater employment, that would also be good.

The ACA is supposedly a positive supply shock — manna raining from heaven — provided that it actually manages to unlock greater efficiencies and reduce waste. No more will people have to toil to enrich the rentiers or snake-oil salesmen (in theory). In that context, whether it increases or decreases employment (depending on whether the economy is demand or supply contrained), it is a good thing.

Obamafare February 5, 2014 at 10:51 pm

You judge the “goodness” of a law based on its lawmakers’ underlying intentions. But arguing Obamacare is good because it is well-intentioned is, well, not a merit that argues to keep it. Because the folks — and dang it, other countries buying debt in the US (including Treasuries, when there was an actual market) — judge a law based on how it effects jobs and the US economy. Heartless, I know, and coldly selfish and linear … but there it is.

Still, let’s go with your “we had good reasons, we meant well” argument for Obamacare. Damn the GDP, full speed ahead! As Kevin Drum maintains (thanks, @mwbugg), it’s always been a well-known fact that welfare programs like Obamacare operate to keep the poor trapped in poverty and perpetually immobile; hence, why now the great outcry? Yet if Congress knew (as Drum insists it did) that Obamacare would even further reduce unemployment among the poor, locking them in an endless cycle of poverty, what say ye now about our lawmakers’ intentions?

David Khoo February 6, 2014 at 10:44 am

You misunderstand me. This has nothing to do with intentions. This has to do with the whether the law turns out to be a positive supply shock.

Let’s say the ACA actually manages to increase the efficiency of provision of medical services as planned. In that case, total supply and the economy’s long-term potential have increased (i.e. the law is a positive supply shock). Whether this leads to higher or lower employment depends on whether the economy is supply or demand constrained, but I think we can agree that an increase in economic potential is a good thing regardless. This is all provided that the law actually turns out to do that. I am actually agnostic on that point.

This is related to depression economics and the zero lower bound. Under at least some New Keynesian models, at the ZLB positive supply shocks can actually lead to economic contraction, and vice versa — which is the opposite of what is expected. In other words, in an economy where the Fed is forced to keep interest rates at zero due to inadequate demand, some good things have bad consequences. Therefore, simply saying that “Obamacare increases unemployment at the ZLB” is not enough to indict it — improvements in technology, higher investment and even more flexible wages all also increase unemployment in the topsy turvy world at the ZLB (at least according to NK models). You need to see if Obamacare increases unemployment when the economy is at full employment and above the ZLB to make a judgement.

derek February 5, 2014 at 11:21 pm

God almighty, the ACA supporters are getting seriously weird.

derek February 6, 2014 at 12:34 am

So people will stop working or work less because if they make a dollar more they will lose the subsidy and have to pay thousands of dollars more to get insurance.

I hereby predict the following, on top of the CBO projections:

The deductibles on these plans are $5-6k. There will be more people dying from lack of care because they can’t afford it than pre ACA.

These folks still need money to live and pay for the things the insurance won’t cover. So essentially the CBO is projecting a growth in the underground economy. These folks will be working, but not in ways that pay taxes. We will see appearance of what will be called Obamacare bankruptcies. The friendly IRS will show up and seize cash and assets from these folks.

The States will be squeezed from both ends; the will see increases in Medicaid enrollments due to the self impoverishment of people, with the increase in expenditures, all the while a larger underground non taxed economy grows. If someone is doing a construction job under the table, no taxes, fees, permits or anything will be paid. Municipalities and other regulatory agencies will be put into a position of having to chase down and try to squeeze money out of stones. High costs but no revenues. The impetus for repeal or serious reform of the legislation will come from States and other levels of government as they have costs imposed on them.

How many more shoes are there to drop due to this terrible piece of legislation?

Tom Donahue February 6, 2014 at 1:41 am

“In other words, would-be workers irrationally undervalue the benefits of having a job and they also underestimate the costs of remaining unemployed.”

Well, this ties in to the last thread that I commented on, about the contempt for low-wage work in the United States, which is different from the way that work is regarded in Japan.

Sure, many unemployed workers might be better off in terms of income if they took low-status, low-paying jobs. But if your self image depends crucially on holding a job where you are treated with respect, like your last one, then taking a low-paying job is not going to solve your problem.

To a certain extent, self-respect depends on the ability to say “I quit” when your boss is abusive. If the ACA makes it possible for more workers to say that, then on the margin it’s a plus.

prior_approval February 6, 2014 at 2:03 am

Unless, of course, you are on the side of those who feel a boss is entitled to be as abusive as they want to be.

Walmart comes to mind, in its attempt to regulate whether its employees could have romantic relationships – in Germany, this was considered laughably illegal by two courts (yes, Walmart appealed – and the second court slapped them down even harder than the first, in part for wasting the court’s time with such a stupidly overreaching belief), as your employer has no rights concerning how you live your life outside of the workplace.

In the U.S., Walmart’s policy is quite different, as Walmart not only pays for your time on the job, they also believe they are entitled to determine how you live your life outside of the job –

‘There is a basic conflict of interest when you manage someone with whom you have a family, romantic, or dating relationship. Even if you’re acting properly, your relationship will likely be seen as influencing your judgment. This can damage morale and disrupt workplace productivity. Therefore, you may not supervise, directly or indirectly, any family members or any associate with whom you date or are romantically involved. This includes situations where you may be able to influence that associate’s terms and conditions of employment, or if that associate can influence the terms and conditions of your employment.

Walmart strives to eliminate personal relationships that interfere with work performance or which may constitute harassment.’ http://ethics.walmartstores.com/IntegrityIntheWorkplace/RelationshipsWithAssociates.aspx

It is a major difference to live in a country which has essentially universal health care, and which also treats with contempt any company claim to determine how people live outside of their workplace, and a country that doesn’t. Though oddly enough, Walton family members seem to be exempt from this policy.

(Note – such an ethics policy can make practical sense in a military context, involving decisions that literally concern life and death. But a discussion of how thoroughly militaristic American society has become is another discussion entirely.)

Nathan W February 6, 2014 at 2:59 am

If a 57-year old leaves the labour market because he can now afford occasional treatment for back pain under the new health plan, then I would be more interested in the improved situation of the 57-year old and the likelihood that a million such similar situations could ultimately improve employment prospects for many unemployed youth. However, it would be difficult to interpret the situation forecast by the Budget Office as having a positive impact on GDP. Then again, GDP is not the only measure of wellbeing of a population. I doubt the Office was able to fully account for the likely long term labour force benefits of a healthier population which enjoys better access to health care services when they need it.

Jay February 6, 2014 at 12:13 pm

If the CBO were only talking about 2.5m old people with back pain we would be having a completely different argument. We are talking about people who can work but will choose not to. How this can be interpreted as anything but disastrous for income mobility in the country and against all argument proposed during the law’s passage is beyond me.

Nathan W February 6, 2014 at 3:03 am

I think the US should commission many studies from researchers in a dozen or so countries (lessons learned from Canada, UK, Denmark, etc.), looking for advice on where the US may be able to reduce costs and/or improve outcomes through public payment mechanisms for the provision of health care services.

jsc7 February 6, 2014 at 3:51 am

It’s possible that rationality is path dependent. When you’re not working, you undervalue work, but when you start working, you begin to rationally see the benefits and couldn’t imagine doing it any other way (like when people start going to gym and cannot imagine how they ever lived without it). Living the reality of working eventually makes people more rational in their decisions about working vs. not working. If that’s hard to picture for employment, consider how people who date regularly view dating in a much more rational way than people who never date.

Weird outside possibility: maybe people just irrationally favor doing too much of whatever it is they’re currently doing. In other words, people who don’t work are irrationally attached to not working and work too little, while people who work are irrationally attached to working and work too much, and anything that can moderate these impulses is good.

wj February 6, 2014 at 7:33 am

This is a disgusting post by Cowen, citing a disgusting article by Douthat, leading to, largely, utterly disgusting posts in response. All of you are wrong.

Bottom line, and what we apodictically know, is that ACA doesn’t deal with fee-for-service nonsense–that’s the problem. Cost containment mechanisms, largely, don’t exists. Now, as to this latest CBO report, and other studies cited by Cowen/Dougthat to counter the labor market flexibility notion cited in the CBO report, well shame on you Tyler and Russ for using the flimsiest of studies. This CBO report paints ACA as, perhaps, the most positive public policy since the Emancipation Proclaimation.

Now, I give Cowen and Douthat credit for not falling into the trap where they then say that the CBO suggests 2.3 million positions losts. In fact, it’s really a 2.3 million position supply boost. And to this, they are to be credited, unlike the typical tea trash drivel.

Turkey Vulture February 6, 2014 at 10:34 am

“This CBO report paints ACA as, perhaps, the most positive public policy since the Emancipation Proclaimation.”

Jay February 6, 2014 at 12:16 pm

When you type something such as “All of you are wrong” you should really make sure your position is well founded but I see you took the opposite track and invoked the Emancipation Proclamation. Just how many Obama bumper stickers do you own?

txslr February 6, 2014 at 3:04 pm

If raising people’s marginal tax rates to a level at which they no longer find it worth working is such a good idea, why stop at 2-2.5m? How about simply confiscating everything that everyone makes. Then we’d ALL be emancipated. New slogan: “Live free AND die – of starvation”.

BTW, equating taxing people out the labor markets with the end of slavery is – dare I say it? – disgusting.

Sam February 6, 2014 at 12:04 pm

“People, it is rather difficult to have it here both ways.”

Really? I would suggest there’s a huge difference between choosing to leave a job and having that choice made for you in terms of feelings of self worth and preparedness. I love to listen to music, but not when someone else is picking the songs.

Boonton February 6, 2014 at 1:53 pm

At 500,000-800,000, I wasn’t *that* troubled: http://nyti.ms/1exzxlm At 2-2.5 million, I am. Is there a # that would trouble @CitizenCohn?

According to http://www.bls.gov/news.release/empsit.t01.htm the civilian non-institutionalized population is 244M people. 2.5M people represents barely 1% of the entire population. 800K, which supposedly isn’t troubling, is 0.3% of the population.

I would say this is essentially noise. Imagine what would happen if the economy improved and at the same time there was a minor fad for ‘traditional families’ causing some women to leave the workforce to become housewives. That could just as easily ‘destroy’ 2.5M jobs. Or there is a counter swing against parents doting on their spoiled kids causing them to push them to get jobs after summer you could easily see the labor force expand by a percentage point.

For example, we are currently seeing an expansion of labor force participatin among the elderly.

My prediction, this will not turn out to be a big deal and when all the dust settles it will require phd level statisticians to even detect whether any workers really left the labor force due to the ACA.

Jay February 6, 2014 at 2:57 pm

Why did you compare it to total population versus the labor force? I mean, I know exactly why you did, but I would like to hear your reason why.

” Imagine what would happen if the economy improved and at the same time there was a minor fad for ‘traditional families’ causing some women to leave the workforce to become housewives”

Irrelevant comparison. This is a controversial (to put it lightly) policy decision (not a fad) that is resulting in labor force shrinkage where there is already an alarming trend downward. This is also not 2.5m middle class mothers as in your example, it is 2.5m amongst the poor which are the people who should be most concerned about working more to rise out of their current tax bracket.

Boonton February 6, 2014 at 9:05 pm

Why did you compare it to total population versus the labor force?

Two reasons.

1. The labor force is made up of only people who have jobs or want jobs. The adult, non-institutionalized population includes those who aren’t in the labor force but might opt to enter it if circumstances were different.

2. The labor force must feed itself and the rest of the population with it’s productivity. The story being put forth here is that some people are just working because they feel they need benefits, so they might stop if they get them. Having health care is very nice, but it doesn’t feed you, put a roof over your head or give you cool stuff to watch on Tv. Presumably these people are already being partially or wholly supported by someone else, a spouse, parents, children, other family members etc.

On top of that, by keeping the whole population in perspective we see that the difference between 900K and 2.5M is basically a rounding error and probably doesn’t consider those who might enter the labor force or be more willing to move to jobs where they will be more productive for both themselves and everyone else if ‘job lock’ is taken off the table by making health insurance slightly less linked to your full time employment at a single (presumably large) employer.

Jay February 7, 2014 at 11:24 am

Re 1) That sounds absolutely ridiculous, 2.5m are being dropped from the number you disregard and instead you use a number which includes everyone to make your number sound lower.

Re 2) “The story being put forth here is that some people are just working because they feel they need benefitsf”

That’s the story being put forth by one side as foolish justification. The story told by the CBO report is that the subsidy system sets up a situation where the marginal tax rate of additional hours of work will be so high as to discourage additional work hours (which equate to 2.5m million workers leaving the labor force).

Boonton February 7, 2014 at 12:51 pm

Re 2) “The story being put forth here is that some people are just working because they feel they need benefitsf”

The story told by the CBO report is that the subsidy system sets up a situation where the marginal tax rate of additional hours of work will be so high as to discourage additional work hours…

Once again this would be someone working for the benefits, not the cash. Getting covered from the ACA exchanges with subsidies or from Medicaid is not going to pay your rent, put food in your belly or green in your wallet to spend. If you decide to stop working because your health care is taken care of then presumably you already have someone else lined up whose willing to provide this for you voluntarily.

These people then by definition are only pretty marginally connected to the labor force.

That sounds absolutely ridiculous, 2.5m are being dropped from the number you disregard and instead you use a number which includes everyone to make your number sound lower.

I’m not including ‘everyone’, I’m including everyone who could be a member in the labor force. That’s usually the adult non-institutionalized population. We can see the rate over time at
http://en.wikipedia.org/wiki/File:US_Labor_Participation_Rate_1948-2011_by_gender.svg

Note that over decades we’ve had participation rates significantly higher and lower than what we currently have. It’s not obvious at all that a high participation rate makes for a good economy or a low one makes for a bad economy (a lot of the post-war boom happened with less than 60% participation, a dramatic increase in the 70’s didn’t make the economy noticeably better).

Ignoto Fiorentino February 6, 2014 at 3:01 pm

The Krueger article does not show that people’s reservation wages are too high as a general matter — it shows that when people are laid off, their reservation wage is anchored to the wage that they used to be paid at their old job.  This could be either because people resist wage cuts generally [a mainstay assumption of both old and new Keynesian economics], or it could be that there is a self-esteem cost to accepting a lower-status job [or accepting that one’s marginal productivity of labor has fallen] that leads people to search too long in the hopes they can replace their old job situation.  

The same mechanism helps explain why laid-off workers are resistant to relocating.  But it does not necessarily apply to workers who voluntarily decide to reduce their employment, because that decision is not accompanied by a hit to self-esteem

pm February 11, 2014 at 5:49 am

My thought too — setting too-high reservation wages sounds less like a simple undervaluing of the costs of unemployment, and more like anchoring and loss aversion. Which would lead to a different prediction for the response to positive shocks.

txslr February 6, 2014 at 3:09 pm

When one gets laid off one’s employer announces their intention to no longer pay. However, there is no explicit refusal to allow you to continue working for free. Hence, if you get laid off you are CHOOSING to stop working, which is a good thing!

Congratulations on your recent firing!

Conflation February 6, 2014 at 7:35 pm

Jay and txslr, calm yourselves. Turkey Vult was being sarcastic (and you’ve conflated the Vult’s comment with the comment left by “wj”).

Turkey Vulture February 7, 2014 at 12:58 am

If you are referring to the Emancipation Proclamation thing, the wj dude actually said that. I just quoted him because it was hilarious. I hope he was being sarcastic but am not so sure.

Marty Mazorra February 14, 2014 at 1:03 pm

Here’s the thing, I think we all know at some level (we have to) that the labor-supply reduction considered here is net a bad thing—for the individuals partaking and overall. This couching it as somehow a good thing in that it offers some folks the freedom to leave the labor force is simply an attempt by those who’ve invested their identity in the success of the ACA to feel better about this monstrosity/disaster of an entitlement, and themselves…

Jay February 14, 2014 at 7:14 pm

While I agree they are 100% invested and can’t turn back now (at least some of them not in too red a state), choosing to defend it makes them, and people that agree with them, look foolish in trying to do so. A more intelligent response to the CBO report would have been “yes we realize this adds an incentive not to work, but so do other means-tested entitlements, and like them, we feel this is worth the trade” ….there done, non-story now. Nah I think we’ll drag it out by bamboozling people and saying its actually a good thing.

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