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ACA may prompt some to work less

February 05 2014

The Affordable Care Act will prompt some people to work less, according to a report from the Congressional Budget Office released Tuesday. Overall, the law will result in 2.0 million less full-time equivalent workers in 2017, the report said. The number will rise to 2.5 million in 2024.

“The estimated reduction stems almost entirely from a net decline in the amount of labor that workers choose to supply, rather than from a net drop in businesses’ demand for labor,” according to the report.

Declines in labor will be largest among lower-wage workers.

“Subsidies that help lower-income people purchase an expensive product like health insurance must be relatively large to encourage a significant proportion of eligible people to enroll. If those subsidies are phased out with rising income in order to limit their total costs, the phase-out effectively raises people’s marginal tax rates (the tax rates applying to their last dollar of income), thus discouraging work,” according to the report. “In addition, if the subsidies are financed at least in part by higher taxes, those taxes will further discourage work or create other economic distortions, depending on how the taxes are designed.”

For the full CBO report, click here.

The agency noted that the report is subject to substantial uncertainty.

Senator Orrin Hatch, R-Utah, said the report was terrible news for the millions of Americans looking for work.

“A direct threat to the long-term health and prosperity of our nation, this law must be repealed,” Hatch said in a statement. “It’s impact and consequences are too great. It’s time this administration starts working with Congress to advance initiatives that will actually spur job growth in our nation.”

A statement by the White House Press Secretary defended the ACA, saying the U.S. private sector added 8.1 million jobs since the law was passed in March 2010.

“In addition, the CBO itself confirms that this analysis of the implications of the ACA on the labor force is incomplete, does not take into account the impact that ACA’s slowing healthcare cost growth which experts have estimated that slower growth in health costs due to the ACA will cause the economy to add an additional 250,000 to 400,000 jobs per year by the end of the decade,” according to the press secretary. “Moreover, CBO does not take into account positive impacts on worker productivity due to the ACA’s role in improving workers’ health, including reduced absenteeism.”

The CBO report also reported no compelling evidence that part-time employment has increased so far with employers putting people on part-time hours to avoid penalties. However, employer penalties for not providing healthcare insurance don’t kick in until 2015.

For more on the report, click here.

Separately on Tuesday, the House Ways and Means Committee passed a bill to change the 30-hour definition of full-time employment under the ACA to 40 hours.

The bill, H.R. 2575, will now go to the full House.

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