Contrary to liberal claims, CBO concludes that labor participation will drop because of ACA’s subsidies, not from the freedom healthcare exchanges offer

Sadly, many liberals (way too many to name) are heralding a new CBO report that predicts 2.5 million full-time low-wage workers will choose to stop working as a result of increased subsidies they’ll receive from the Affordable Care Act. These advocates mistakenly claim the CBO has concluded that untethering insurance from employment will allow people to make more optimal choices about whether to work.

While it’s true that enabling people to gain health insurance from a source other than their employer may reduce workforce participation, those heralding the report conflate the effects from untethering with the effects from subsidies. The CBO’s forecast is based solely on its conclusion that low-wage workers will choose to work less if the government (i.e., taxpayers) pays them to work less—through increased healthcare subsidies based on low earnings —and withdraws that subsidy if they earn more. Nowhere does the report say labor supply drops from the creation of healthcare exchanges that facilitate the untethering of insurance from employment—i.e., the feature that allows optimum choice.

Excerpts from Appendix C of the report, “Labor Market Effects of the Affordable Care Act,” make this clear:

“In CBO’s view, the ACA’s effects on labor supply will stem mainly from the following provisions, roughly in order of importance:

•   The subsidies for health insurance purchased through exchanges;

•    The expansion of eligibility for Medicaid [i.e. subsidized healthcare];

•    The penalties on employers that decline to offer insurance; and

•    The new taxes imposed on labor income.”

“CBO estimates that the ACA will reduce the total number of hours worked…almost entirely because workers will choose to supply less labor.”

“The largest declines in labor supply will probably occur among lower-wage workers.”

“The reduction in CBO’s projections of hours worked represents a decline in the number of full-time-equivalent workers of about 2.0 million in 2017, rising to about 2.5 million in 2024.”