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Thursday, Jul 24, 2014

ACA discourages work — and makes sense anyway


The discussion over the employment effects of the Affordable Care Act has taken a strange turn. It’s come to this: We’re arguing about whether somebody who chooses to work less because of the health-insurance subsidy is behaving rationally.

In case you haven’t been following, back in 2010 the Congressional Budget Office estimated that the ACA would reduce labor supply by around 800,000 jobs. That’s the net result of several different effects, but here’s one: Some people would work fewer hours, and some would quit work altogether because the insurance subsidy would make it an affordable option. A new CBO report has fiddled with the assumptions and says the reduction will actually be equivalent to a little more than 2 million.

A common first response was, “What? The CBO says the ACA costs jobs?” Apparently that first estimate hadn’t received the attention it deserved.

After a pause for partisan sorting, the second responses arrived. Conservatives said, “See, we told you ACA was a job-destoyer.” Liberals said, “It isn’t a problem. The point is, people will be choosing to work less. That’s a good thing.” Matthew Yglesias at Slate calls it a reduction in avoidable suffering.

On to stage three. Tyler Cowen agrees with liberals that the people working less will be choosing to do so, but questions whether that’s a good thing. In choosing to work less, he says, people might be making a mistake. Ross Douthat agrees. A lot of people don’t know what’s good for them.

Here’s my take. The ACA subsidies don’t “kill jobs;” they cause work to be abandoned. Let’s give liberals that vital point. I’d say they’re also right in thinking (for once) that people mostly know what’s good for them. At least, it’s a fair working assumption that people are the best judges of their own welfare.

That just leaves one thing — the small and strangely neglected matter of who pays for the subsidies. As a taxpayer, I’m more than happy to finance a subsidy that guarantees access to decent health care for all. I’m not so happy to subsidize your early retirement or improved work-life balance. Health care is, or should be, a basic entitlement. Your lifestyle choices aren’t.

Society is also entitled to expect something of those who aren’t too young, too old or too sick — that people who can work will work.

If you’re receiving transfers and services financed out of taxes, as we all are, you have an obligation.

The ACA is a good policy despite the fact that it will discourage work to some extent. Liberals, is that so hard to say?

Clive Crook is a member of Bloomberg View’s Editorial Board.