Did the Medicaid expansion limit labor force participation?

by on June 14, 2016 at 2:24 pm in Current Affairs, Economics, Law, Medicine | Permalink

I study the effect that expanding Medicaid eligibility has on labor force participation of childless adults. The Affordable Care Act provided federal funding for states to expand public health insurance to populations that had never before been eligible for the benefit on a large scale, among those are adults without dependent children. A 2012 Supreme Court decision allowed states to choose whether or not they wanted to accept federal funds to expand Medicaid eligibility, resulting in a situation where roughly half of the population resided in states that had expanded Medicaid eligibility in 2014 and half did not. I exploit this variation by conducting a series of difference-in-differences and triple differences analyses both at a local level within one labor market, and nationwide to determine the relationship between Medicaid expansion and labor force participation. I find a significant negative relationship between Medicaid expansion and labor force participation, in which expanding Medicaid is associated with 1.5 to 3 percentage point drop in labor force participation.

That is from a Georgetown thesis by Tomas Wind, via Ben Southwood.  Given the possibility of paternalistic judgments in health care policy, the simplest question here is whether this class of individuals is better off as a whole, as a result of some of them choosing this trade-off.  Work is good for most people, and it is even better for their future selves, and their future children too.

1 Ray Lopez June 14, 2016 at 2:31 pm

No.

2 Cliff June 14, 2016 at 3:00 pm

I look forward to reading your study

3 Mid. J. Etch June 14, 2016 at 10:38 pm

I really wonder if “labor force participation benefits” has any meaning as an aggregate. For example, being paid for research prolly has benefits, prostituting prolly hasn’t.

4 rayward June 14, 2016 at 2:40 pm

Did states that chose Medicaid expansion have more or fewer job openings as compared to states that chose not to expand Medicaid, labor force participation being a function of job openings? There was a spike in job openings in 2014 (news to the authors of a widely cited study that attributed employment gains in 2014 to the termination of extended unemployment benefits at the end of 2013), so I would think there might be a correlation. And it’s not as though the two categories of states (expansion vs. no expansion) are widely dispersed.

5 Cliff June 14, 2016 at 3:01 pm

I can explain it all away!!

6 Doug June 14, 2016 at 2:55 pm

It’s funny that to get people to do something actually good for their health (work), we have to scare them about the impact on their health from lack of something that has zero net effect on health (medicine).

7 Jason Bayz June 14, 2016 at 7:35 pm

How do we know that work has beneficial effects on health?

8 Harun June 14, 2016 at 10:30 pm

I can’t sit on my couch and eat doritos all day at work.

9 Mid. J. Etch June 14, 2016 at 10:40 pm

How about standing up in Wal-Mart all day ?

10 Michael June 15, 2016 at 10:00 am

You really have no conception for how little exercise many people get, huh?

11 Bill June 14, 2016 at 2:57 pm

If you are dead or sick in the future,

Because you did not get healthcare today,

Does that count towards labor force participation.

12 Dmitri Helios June 14, 2016 at 3:54 pm

Are you sure you don’t want to be on a poetry/haiku blog?

13 Bill June 14, 2016 at 5:27 pm

Unable to download the thesis, let me hypothesize that it was

The almost ready to retire WEALTHY persons who exited from the workforce and took the subsidized or available healthcare plans

Because they could live off their retirement assets secure in the knowledge that they could get or would have insurance until they were eligible for Medicare.

Even DT (Don Trump) could do this because he had such low taxable income and high wealth.

I bet this was HUGE.

14 Harun June 14, 2016 at 11:23 pm

You could be right, except there may be asset tests for Medicaid.

I can’t cut and paste, but I found that ACA changes to remove asset test and only use 133% of poverty for Medicaid in adults, so it sounds plausible.

But, even if this is true, it is bad. People making decisions to take subsidies and not work is not good. Its bad.

15 Bill June 15, 2016 at 7:29 am

I wasn’t talking Medicaid, I was talking about the Affordable Care Act exchanges or subsidies.

16 Barkley Rosser June 14, 2016 at 3:02 pm

Bill raises a good point, which may have been addressed in the thesis. Do we know the health status of these people who did not join the labor force? Might they in fact be people with bad health who would be better off not working and would only work because they have to get health insurance? Or are they all just a bunch of healthy lazy bums?

17 Bill June 14, 2016 at 3:15 pm

There is also the present self and the future self. Get well today so you can work tomorrow.

Furthermore, unless I am weird–and some here will say I am–I have never viewed having a doctor or nurse prick me, poke me, and do all sorts of other medical things something very enjoyable.

I mean, getting healthcare is not like having ice cream.

Unless you are a sadist.

18 Thomas June 14, 2016 at 5:38 pm

Giant load of bs. The reality is that people like you and Barkley provide the intellectual smokescreen for nefarious Democrats intentionally creating welfare cliffs and chasms. Make $30,000 as a family of three? Your best financial decision is to reduce your income for medicaid eligibility. This is true all the way to at least $50,000. That’s what it takes to ensure welfare dependancy for votes.

It doesnt take a rocket scientist or a JMU econ professor to figure out that the optimal welfare structure is a smooth gradient of benefit dollars with a slope -1 <x <0 as income rises.

19 Jan June 14, 2016 at 6:13 pm

Haha. Do you realize that the ACA health insurance subsidies do exactly what you are proposing?

20 Thomas June 14, 2016 at 8:59 pm

Yeah, except for that infinite marginal tax rate at medicaid +1 that your political leaders modelled after their other brilliant programs.

21 Barkley Rosser June 14, 2016 at 6:53 pm

Thomas,

I have made it my own personal crusade to create as many huge welfare cliffs and chasms as possible in our system as possible and to do it in as nefarious a way as possible. I mean this will really separate out the lazy bums from the virtuous poor.

22 Thomas June 14, 2016 at 8:57 pm

You are doing a good job, never forget that your mostly female students will either join the welfare track or the career track. Blame yourself for supporting these awful policies through your embarassing online advocacy.

23 MyName June 14, 2016 at 9:43 pm

You know, one way to smooth the “gradient” would be to have universal single payer healthcare instead of this patchwork system now…

24 Laocoon June 14, 2016 at 10:06 pm

Agreed. Why not level the playing field by universal healthcare and see how labor force statistics turn out? Many people I know make decisions re employment based on health insurance options. Taking this complex set of decisions out of the labor force participation decision.

25 Bill June 14, 2016 at 3:26 pm

There is also probably a lagged variable here as well. Does he measure whether the person, after receiving healthcare, later re-enters the workforce.

26 Jan June 14, 2016 at 3:15 pm

This has been studied before, a few times actually. The findings in this thesis are pretty much the same as previous studies.

Yes, Medicaid expansion for childless adults is consistently associated with an expected and very small reduction in labor force participation.

http://www.ncbi.nlm.nih.gov/pmc/articles/PMC4803716/

http://mcr.sagepub.com/content/69/6/645.short

27 Jan June 14, 2016 at 3:17 pm

And here’s an analysis from that Obama shill, Sarah Kliff (now at Vox), that pretty much reached the same conclusion in 2014: https://www.washingtonpost.com/news/wonk/wp/2014/02/05/yes-obamacare-will-probably-downsize-the-workforce-economists-explain-why/

28 AlexR June 14, 2016 at 5:24 pm

A 1.5 to 3 percentage point drop in LFPR is large.
Pardon my simplistic economic thinking, but this result suggests that the Medicaid expansion is an inefficient way to improve the lot of indigent workers.

29 Jan June 14, 2016 at 5:55 pm

Really? What do you think we would find if we looked at the circumstances of the workers who dropped out of the labor force during the Medicaid expansion? What share of that 1.5 – 3% do you think was actually enrolled in Medicaid? What share of them do you think had been previously working a job just for the health care benefits? If one is so sick they are literally working just for health care, do you think it is good for society overall that they were working that job? What more efficient method would you suggest to improve health care access for indigent workers? Keep in mind that just giving people money instead of health care is a political non-starter, so that’s off the table.

*Adjusted for the characteristics of the population, Medicaid is a very, very cheap way to provide health care to people.

30 Because feelings June 14, 2016 at 6:07 pm

1.5-3% is a number, all your other wall of text is emotion-driven speculation.

31 Jan June 14, 2016 at 6:17 pm

1.5 – 3% of people in the labor force dropping out is only relevant if they dropped out because they got Medicaid. I guarantee you that is not the case.

You have no answers to the other questions. And you have no alternative to Medicaid expansion except “fuck ’em”. So good work.

32 Cliff June 14, 2016 at 6:30 pm

But your whole theory of people working just for health insurance was created whole-cloth, so how can we respond to it?

33 Jan June 14, 2016 at 6:57 pm

Cliff. Do you really, really not believe that some people work just for health coverage? The people quitting jobs they only had for insurance and going on Medicaid was an R talking point about how the ACA was going to destroy America, remember? My wife and I had a kid recently and she said the mothers’ forum all had at least one thread about moms quitting work and going on Medicaid.

http://money.cnn.com/2014/02/25/news/economy/obamacare-job/

http://www.whattoexpect.com/forums/stay-at-home-moms/topic/i-had-to-quit-my-job-to-get-medicaid.html

34 Jon June 15, 2016 at 6:06 am

Or that the study is highly flawed; Tyler does not filter well.

Dramatic claims should have dramatic evidence.

Likely this study is flawed. The “1.5%” impact found in a prior study was for granting basic medicaid to more people, not to increasing the income threshold. Thus this result does not match other studies.

35 Michael June 15, 2016 at 2:51 pm

This was my thought. The medicaid expansion only covers, what, 7% of the total population? Half of those are not in the labor market anyway (seniors or children). If that’s the case, a half of work-eligible recipients drop off the labor rolls? Am I reading these numbers wrong? That seems like a huge effect to me.

36 Cliff June 14, 2016 at 3:19 pm

What are the implications for UBI?

37 8 June 14, 2016 at 3:36 pm

They’re lazy bums. You can drive a truck through the loopholes and collect income while getting free stuff. Getting NINJA loans was harder work.

38 Bill June 14, 2016 at 6:54 pm

you mean the wealthy near to retirement elderly.

39 Harun June 15, 2016 at 12:33 am

Still lazy. Still bums. Spend your own money and don’t plan financially to break the spirit of the law to get free stuff.

40 kevin June 15, 2016 at 2:27 pm

How do you plan to pay for a million+ dollar emergency? If you’re suggesting we should simply plan to buy insurance for ourselves if we don’t want to work, that would be nice… if that had been an option.

41 JonFraz June 14, 2016 at 3:52 pm

Why would this happen? Sure, they are getting free health insurance– but nothing else. Assuming they are healthy the more rational choice would be to take a job even if it did not offer health insurance– they will benefit more from doing so since a cash income trumps non-fungible benefits. If necessary they can get a heavily subsidized policy from the exchanges.

By the way I was unemployed in 2014 for three months, and was covered by Medicaid then, but I had only a very small income. As soon as a job offer came my way I took it (yes, the new job had health insurance) for the exact reason that I needed an income more than I needed free health insurance.

42 Thomas June 14, 2016 at 5:30 pm

There are things called families, wherein two adults may choose whether to work. There are also things called cash jobs. Your post suggests to me that you simply aren’t qualified to comment. You apparently don’t know the first thing about being poor.

43 Bill June 14, 2016 at 6:56 pm

Yeah, people just love to be poked by doctors. And, if it is two people working at the poverty level, let’s push their head under water and see if they swim with the weight of medical care around their necks.

44 Barkley Rosser June 14, 2016 at 6:56 pm

No, Thomas, JonFaz is just another nefarious plotter trying to build more cliffs and chasms. Cut him some slack.

45 JonFraz June 15, 2016 at 2:54 pm

If we are talking about one spouse working while the other stays home with the kids, then I’m all for that.
However I doubt that’s the case since the working spouse’s income (if it’s sufficient to provide for the family) would also easily disqualify the family for Medicaid. (The qualifying income income is exceeding low. When I applied it was ~17K/yr for a single person. No one in the US is living like God on a holiday on that pittance!)

And just what are the qualifications for posting here? Agreeing 100% with the blog host? With right wing boilerplate propaganda?
Unless you are Tyler Cowan under a pseudonym, or maybe an unidentified moderator you have no business pontificating on who may post here.

46 Matt June 14, 2016 at 3:53 pm

“Stay-at-home moms are hurting the kids” -Tyler Cowen 🙂

47 anon June 14, 2016 at 5:06 pm

It would be nice if we had a one-stop-shop for benefits, but also for nudges in the right direction. A mess of state and federal programs are difficult to navigate, and can easily create perverse incentives. “I just got all my paperwork square, I can’t move to look for a job.”

It would be nice if there was an office that just needed a SSN to give you a hot meal and a bed (if you have nothing else), but also knew enough to prevent fraud, to give you rewards for work (or community service, or good grades).

Sadly one outcome of political polarization is a ground game of inches, on all those conflicting programs.

48 AlexR June 14, 2016 at 5:12 pm

In the good old days in economics, it was taken for granted (and rightly so) that when a person is presented with an opportunity and accepts it, the person is better off, at least in expectation. This simple idea was productively exploited in what was once called the “revealed preference” approach. Nowadays the “simplest question” to ask is whether the person really is better off? And asking this simple question *avoids* “paternalistic judgments”? Time was when such gobbledygook would raise eyebrows.

49 kevin June 15, 2016 at 2:30 pm

Those two things are entirely consistent since you included “…at least in expectation”, at the end of your first clause.

50 Thomas June 14, 2016 at 5:20 pm

This is comment bait for liberals who are too partisan to address reality. The amusing thing is that effects like these are obvious to a freshman taking intro to micro, yet somehow “elude” the establishment left. The reality is that our welfare system is designed with cliffs intentionally, and people with positions of influence (like JMU professors) and poor character play the fool about it to avoid the truth. “How could we possibly design a welfare system to have a smooth disincentive effect to avoid cliffs that maintain systemic poverty” said no Democrat ever.

51 Thomas June 14, 2016 at 5:26 pm

A family on medicaid: if they earn $1 over the eligibility limit, they face a marginal tax rate of (silver plan annual premium + the reduced quality of insurance). So much for taking that assistant manager position or having more than one adult working outside of the home.

In America you can live in comfortable poverty courtesy of Democrats. If you don’t start on the career track out of college, Democrats have ensured that the rational decision is to stay in comfortable poverty for life. Why work harder to be worse off?

Thanks, Obama.

52 Barkley Rosser June 14, 2016 at 7:00 pm

Wow, we must all be grateful to the very nonpartisan Thomas, who has discovered cliffs for us. Of course all those people without any health insurance in states that did not expand Medicaid are better off than those who got it in the states that did expand Medicaid. Any idiot who knows how to fall off a cliff can see that!

53 Thomas June 14, 2016 at 9:03 pm

Just how stupid are you, Rosser? The entire system has been designed in this way. That includes the system prior to medicaid expansion. Medicaid expansion just expanded poor incentives to couples with skills worth ~$12/hr. Democrats had full control of this legislation, Barks, why didn’t they smooth out medicaid dollars? They are either too stupid or they are evil, what say you?

54 AlanW June 14, 2016 at 11:22 pm

Man, Thomas nailed it. If only there were sliding-scale subsidies available to buy those silver plans, it would have all worked out. What were those silly Democrats thinking?

55 Thomas June 15, 2016 at 12:28 pm

From medicaid to silver is what I am talking about, but nice try.

56 JonFraz June 15, 2016 at 3:03 pm

Are you posting from an alternate reality? Survive on poverty, maybe. But live “comfortably”? Why don’t you try it sometime and see just how comfortable it is.

57 Thomas June 15, 2016 at 6:05 pm

I live in comfortable poverty as a veteran and college student and I grew up around poverty. Unlike every leftist poster here, I know all about poverty and the choices people in it face.

58 anon June 14, 2016 at 5:30 pm

For as long as I could, I helped an old co-worker. He was pretty bright and probably measured a fair amount above average on IQ. The thing was, after a few months at most jobs he’d feel people were conspiring, and he’d quit. For that reason his resume looked like hell. At one low point he went to apply for Welfare. He got up and left because the lady asked “too many questions.”

I get that there are disincentives, but for the people who need help incentives aren’t always enough. They need an easy to navigate structure, with the right incentives. Maybe some people even need a patient social worker to check in on them. That’s expensive, but that’s the kind of thing that keeps the mentally ill, but not “incompetent” off the streets.

59 anon June 14, 2016 at 5:32 pm

Oh, why didn’t he get help from his family? He had “memories” from the womb of his mother not wanting him, so he could not accept her help.

Thanks, Obama.

60 JonFraz June 15, 2016 at 3:05 pm

Um, what does Obama have to do with a guy who was apparently suffering from a mental illness? Is he also to blame for the San Francisco Earthquake and the Lincoln assassination?

61 Thomas June 14, 2016 at 5:41 pm

There are people with mental illness. That doesn’t seem relevant to whether a welfare system should be designed such that for some people, the rational decision is to reduce work hours. Next time advise your friend to use your state’s convenient internet portal to apply.

62 anon June 14, 2016 at 6:01 pm

I think you should really slow down and think about that. The mapping between “rational agents” and “users of the welfare system” might be much less than 1:1. Indeed the welfare system might be mostly for people who hare not “rational agents” in the economic sense.

63 prognostication June 14, 2016 at 11:28 pm

Even in the subsidized insurance markets, anecdotally I know that there are people who didn’t understand the cliff until they’d already gone over it and were doing their taxes and had to pay back the subsidy. The whole assumption that people make choices based on complete information is… questionable. At best.

64 Barkley Rosser June 14, 2016 at 7:01 pm

And Thomas knows all about mental illness as he has it big time.

65 Thomas June 14, 2016 at 9:05 pm

You are an embarrassment to JMU.

66 Barkley Rosser June 15, 2016 at 8:04 am

Awww, poor Thomas. You like to hand it out, but you can’t take it.

67 Bill June 14, 2016 at 7:03 pm

Tom, I think you have a problem doing math but dont let logic get in the way of your feelings about poor people.

If a person voluntarily drops out of the labor force, unless they have assets, they have zero income from that, even though they have subsidized medical care (by the way, we are not talking Medicaid (which considers assets), we are talking about the Affordable Care Act subsidies). So, Thomas, if someone were making a living at the minimum wage of $15,080, drops out of the workforce, please tell me what income they receive.

Fill in the blank below.

68 Thomas June 14, 2016 at 9:22 pm

Why don’t we ignore your pathetic argument in which you pretend to not understand what a continuous function is, pretend not to be familiar with welfare programs and pretend not to know that it is possoble to reduce income without going to $0. Let’s just address the empirical facts: 3% of the population responds rationally to the incentives relevant to >3% of the population.

Since I think you and Barkley are willfulky ignorant and completely lacking in experience, given your tweed-bound lives of leisure, answer for these incentives:

Husband, wife, child. No education, low population area in a “flyover state” (Barkley-JMU hates provincial people). $12/hr for physically taxing labor.

80 hours per week:

$48,000 annual income.
Silver plan or comparable: $6,000 per year, plus 1000-2500 co-pay, 20% deductible

40 hours per week:

$24,000 annual income
Medicaid worth $6,000-10,000 per year
Food Stamps: $1,500 per year
Childcare: $4,000 per year (20 hours per week)
Pell Grant: $11,000 per year for 4 years (2 adult students, why not? Don’t even need to do the homework)

Why work twice as hard for the same standard of living?

P.S. poor grad students aren’t “poor”, ignorant upper-class slobs like Barkley have never known a real poor (mind, spirit, income, and wealth) person in their entire lives.

69 Bill June 14, 2016 at 9:41 pm

You have to give it to you.

When you open by saying: Let me ignore the pathetic argument you made about a person making minimum wage and getting out of the workforce to get $0 income.

Then, you create a fiction of a husband and wife “with no education” getting a Pell grant for graduate school of $11,000 a year. I bet you never got an education–or, maybe you did in fiction.

It only gets better: you live off of foodstamps worth $1500 a year. That’s a good one. I don’t know where you get this $4k for childcare from, but if it is imputed income, an economist would say that you would deduct an equivalent childcare cost from the $48k unless the kid is staying at home watching TV.

So, to make your argument work, you need uneducated graduate students getting Pell grants worth $11k a year, who live off $1500 in food stamps, and relying on Medicaid.

Thomas, get help. You look foolish. You are living in fiction.

Get a Pell grant.

70 Ricardo June 14, 2016 at 11:07 pm

“$48,000 annual income. Silver plan or comparable: $6,000 per year”

Nope. Premiums are subsidized based on income so a family of four with $48,000 in income will pay silver premiums that top out at about 8% of income.

71 Barkley Rosser June 15, 2016 at 8:06 am

There you go again, Thomas, getting all hot and bothered and letting your brain fall out of your head while proceed to step all over it in your seething rage.

72 Barkley Rosser June 15, 2016 at 12:24 pm

Gosh, I must apologize to Thomas.

First of all, I simply did not realize how sensitive and knowledgeable he is about poor people. But then I read Mother Teresa’s account of how helpful he was to her, the most sensitive, the wisest person. Without his help her mission in Calcutta/Kolkata would have just completely failed. He is simply a wonder with poor people, nobody like him.

And then we have his important role in developing the theory of continuous functions. I got around to reading his heavily cited article in the Journal of Symbolic Logic on the fundamental differences between the classical and nonstandard analysis views of the infinitesimal, a totally brilliant and insightful paper. And for all its abstruseness, this was followed by his ground breaking article in the Journal of Economic Theory where he showed how this discussion influences how we build cliffs and bridges in social welfare policy, ooops, or is that chasms and highways, or maybe walls and vacuums? His paper was so insightful I kind of forget. After all, I am merely an embarrassment and know very little, poor me.

73 Thomas June 15, 2016 at 12:51 pm

The response by the virtue signalers to an argument that: “Democrats aren’t stupid, so they must have created cliffs intentionally” is enough to demonstrate their insecurity on the point.

Bill and others: not graduate school, undergraduate. You got grad student from another comment in which I attempted to illustrate the difference between the low income peoplr Barkley knows, who are rich in intelligence, determination, and status, and real poor people. A professor and son of a professor was naturally born of peivilege and remained in it. How useful can arguments about how poor people respond to incentives be, when they come from someone who has never known a section 8 tenant in his life?

Food stamps was an oversight, the range of food stamps for that situation varies but should be 1500 on the low end and 4500 near the top.

Health insurance: 8% of 48,000, + deductibles, + copays, etc.

Childcare: this is child care assistance. If both parents work or attend school at a set time, thr state pays for childcare.

I forgot EITC! add another $0 in the 48,000 and $2,000 in the 24,000 column.

My argument was that Democrats design these systems so poorly because they are stupid or evil. Given the pushback I am receiving about the design of these systems (and those pushing back are also denying the empirical evidence posted by TC), I guess the answer is stupid. My own theory is that the people who are respondong are wholly insulated from real poverty and just can’t imagine that anyone would do that. From a poor person’s perspective, they would be in shock that a tenured professor puts in more than the minimum effort required.

74 Barkley Rosser June 15, 2016 at 2:53 pm

Of course, Thomas is right yet again. The “virtue signalers” are just a bunch of sinful hypocrites who will burn in hell. There is nothing worse in this world than creating walls and chasms in the social safety net, nothing. Compared to this, child pornography and genocide just pale into insignificance.

75 JonFraz June 15, 2016 at 3:07 pm

Under the ACA, in states that are compliant with it, Medicaid no longer considers assets for eligibility. There’s a single income test and that’s it.

76 Thomas June 15, 2016 at 6:10 pm

Well Barks, don’t be too sure. I imagine that using ‘mental illness’ as an insult is considered far worse than designing safety nets to maintain poverty, among the maoists you produce at JMU and the adminstrators thereof. As an anonymous internet commenter, I don’t try to leverage real-world status in comment sections, and therefore don’t face any career implications for being an ableist.

77 Barkley Rosser June 15, 2016 at 8:32 pm

Again Thomas is right. As anyone can see who checks this thread, from my very first post onward I mentioned that I was a JMU professor of economics and used this to leverage my comments against stupid people I disagreed with. Just repeatedly beat them over the head with it, as well as listing my publications and so on and so forth. As you can see, this just completely cowed the anonymous veteran raised in poverty, Thomas, who just rolled over and said, “Gee, Professor Rosser, you must be right since you are such an important professor!” Anyone who reads this thread can see that this is how things have gone down. I am just a big mean bully who browbeats lesser intellects with my superior professional standing and genius.

78 Jan June 14, 2016 at 6:06 pm

Ah, no. Phased benefits are often a good idea, but they can be hard to administer (i.e. more bureaucracy for R’s to run away from screaming) and have the added problem of starting to “give people stuff”–just a little bit–before they are absolutely destitute, which Rs can’t accept.

Obama proposed increasing the EITC, something R’s had said they support for years. AEI, Makiw, Heritage, and others said it’s a good idea. You know far that got, eh?

Tell us more.

79 Thomas June 14, 2016 at 9:28 pm

Boogeyman of the left, Milton Friedman proposed a negative income tax decades ago. B. Obama “got over” his “libertarian” phase. Continuous phased welfare doesn’t take more beaurocracy unless you are tethered to government unions. Negative income tax -> give monthly estimated payments after year 1. Alternatively, each program will now use a smooth function and reward assistance accordingly. How many employees do you need to operate servers that compare IRS income to program standards? Overpayments can be recouped in tax returns by a program as they are now, or can be adjudicated in court.

80 Ricardo June 15, 2016 at 3:35 am

Yes, Milton Friedman proposed a negative income tax and Mitt Romney, the WSJ op-eds and others strongly criticize the idea that a significant proportion of Americans should not owe any net federal income tax (especially because of the Earned Income Tax Credit, which is less generous than a negative income tax would be). Take it up with them.

81 MyName June 14, 2016 at 9:47 pm

In terms of removing the “cliff”, I believe the solution is single payer coverage like the rest of the world has. And *alot* of Democrats have said that.

82 Thomas June 15, 2016 at 12:53 pm

One wonders why they didn’t impose that system when they had the chance?

83 Troll me June 15, 2016 at 11:21 am

I think you would find Democrats generally more open to being concerned about maintaining access to basic services, etc., in a manner that effectively addressed cliffs, compared to Republicans, more of whom would rather do away with the benefits altogether.

Your tendency to assume that other people can only hold irrational views is not conducive to clear thinking on the matter.

On the matter of “obvious to a freshman”. Well, yes, it is obvious that there is an effect there, in the direction that the econ 101 student would suggest. But that ignores that the real world is more complicated.

84 Urso June 14, 2016 at 8:15 pm

What is the precisely optimal percentage of labor force participation?

85 john gibson June 14, 2016 at 8:41 pm

Actually, the simplest question here is who should be the judge of whether this class of individuals is better off as a whole, as a result of some of them choosing this trade-off–these citizens themselves or some know-it-alls. Yes.work is good for most people, and it is even better for their future selves, and their future children too. Usually. Health is good for most people, and it is even better for their future selves, and their future children too. Always. How can you justify taking the choice out of their hands just because in your judgment it’s the less desirable choice? Plus this study is far too narrow and simple to provide any conclusive judgments. At any rate, Obamacare is a done deal, and only time will tell, as no competing schemes have been put forth. That’s hardly the fault of the ACA. The study might help this student get a foot in the door of some Loonie-Tunes think tank. That’s one job anyway. Keep up the work. It is so good for you.

86 Steve June 14, 2016 at 9:39 pm

I also have always wondered about this effect with regard to rent control. How many children, knowing they will inherit a rent controlled apartment–well below market value, never maximize their opportunities, talents, gifts? How does it affect their social circles as well? These children can become very protective of these inherited apartments–it seems like it would more frequently be a burden to carry that they don’t realize, anchoring them in one place without incentives to grow, than anything else. I have seen some examples of this play out in the real world. Then again, isn’t there a similar effect with regard to labor unions and pensions–keeping you locked into a job you may hate for 25 years knowing you have to get to that magic number your innovate and entrepreneurial dreams, hopes, desires be damned?

87 MyName June 14, 2016 at 9:50 pm

Considering how weird and messed up the real estate market is in many cities. I believe you can find an example to support any position you choose to take on any aspect of housing. Doesn’t mean we should/shouldn’t drop rent control, or mortgage subsidies, or any other policy you can name.

88 chuck martel June 14, 2016 at 10:33 pm

Labor union pensions, particularly in the construction industry, aren’t a favor to the workers but instead an incentive for them to endure lay-offs and stay in the field so that they’re still available to employers. A union brick layer with 5 years of pension credits is reluctant to walk away from that and go to work as a diesel mechanic. Additionally, unemployment insurance is a subsidy that allows contractors to lay off seasonal workers and be confident that they’ll be available when work picks up. Even the federal government has permanent seasonal employees that collect unemployment every year when they’re laid off. It pays for their winters in Mexico.

89 JonFraz June 15, 2016 at 3:10 pm

In those cases aren’t we really just seeing income smoothing?

90 Thomas June 15, 2016 at 6:14 pm

Income smoothing contingent on terms such as vesting periods or length of employment. Student loans, 401k plans, and to a lesser extent social security do ‘lifetime income smoothing, much better than union pensions.

91 Jon June 14, 2016 at 10:18 pm

Medicaid expansion allows people to enroll in medicaid if their income is up to 133% of the poverty line. In states without the expansion, medicaid serves people at the lower end of the income range. The additional people who became eligible due to the medicaid expansion would have to have been working; otherwise they would have been eligible for pre-expansion Medicaid.

Actually without the Medicaid expansion the cliff is worse. If goes just above the income threshold, the benefit goes away; With the Medicaid expansion the benefit does not sharply go away, but it is replaced by the exchange subsidies.

92 JonFraz June 15, 2016 at 3:12 pm

There are states whose pre-ACA eligibility criteria are extremely restrictive: in some states one must have minor children, be over 65 or disabled to qualify for Medicaid, even if one’s income is $0.

93 Sam Penrose June 15, 2016 at 7:37 am

“the simplest question here is whether this class of individuals is better off as a whole, as a result of some of them choosing this trade-off. Work is good for most people, and it is even better for their future selves, and their future children too.”

Shouldn’t we be thinking at the margin here? If 1 of 50 people decides to give up work, shouldn’t we default to the belief that work is less valuable (or has a higher opportunity cost, etc) for them than for the other 49 in the group?

94 Troll me June 15, 2016 at 10:38 am

If this is a problem, wouldn’t it make sense to consider qualification for health service which is not contingent on not working?

It does seem rather obvious that it would reduce labour force participation the way it’s set up, but I don’t think you’re going to be losing the next Musk or Einstein out of that pool. Perhaps in the longer run it could be creating more opportunities for people who can build their human capital over the course of a longer and more successful career? It’s not obvious that the long-term economic effects would necessarily be negative, although it strikes me as likely to involve a bit of wishful thinking to suppose it would be a particularly positive effect.

(But, at least it’s probably not nearly as negative as it would look at first glance, and the negative aspects could be addressed by not making access to public health care contingent on being in a disadvantaged situation.)

95 michelle ortega June 16, 2016 at 2:07 am

Creative suggestions . Coincidentally , if others wants to merge two PDF files , my company merged a service here http://goo.gl/3zpjPe.

Comments on this entry are closed.

Previous post:

Next post: