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Obamacare, Job Loss, and Conservatives



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I’m seeing a lot of liberal commentary along the following lines: Yes, Obamacare will reduce people’s willingness to work, but 1) that’s because it loosens the link between employment and health insurance, and 2) that’s something conservatives also want to do, and which their own preferred health policies would do. Sahil Kapur, for example, makes this argument.

And conservatives should concede that there’s a bit of truth to it—but only a bit. But CBO isn’t saying that Obamacare reduces people’s willingness to work solely or even mainly by letting them get health insurance without a job. CBO says that Obamacare reduces this incentive as well by raising people’s implicit marginal tax rate: the more money they make, the more Obamacare reduces their tax benefit. So 1) is not the full story. Obamacare shrinks the labor force more than just extending health coverage would.

As for 2), the Coburn-Burr-Hatch bill also reduces tax benefits as incomes rise. But that’s not a necessary feature of conservative health plans: The McCain and Ryan plans have not involved such phaseouts, for example. Going forward, I hope the bill by Coburn et al is modified so it doesn’t have them either—because there is some reason to think that these phaseouts can have pretty large effects on employment.



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