CBO Estimates the Effect of Obamacare on the Labor Force

Job, Work, MarketThe Congressional Budget Office (CBO) has released a new estimate of Obamacare‘s effect on the labor force in coming years. The CBO originally believed some 800,000 workers would exit the labor force, but they have upped their estimate to a loftier figure of 2.3 million exiting workers by the year 2021. Republican critics of Obamacare have long feared that the Affordable Care Act would cause employers to lay off workers, yet the CBO’s updated estimate is largely a product of their belief that workers will increasingly face disincentives to remain in the labor force.

Potential Impact to be felt in 2017

The CBO, admittedly, does not have a crystal ball at their disposal. Their labor force projections will prove to be accurate, or exaggerated, in 2017, when many signature Obamacare provisions begin to take effect. Of the 2 million workers who will supposedly exit the labor force, the lion’s share will consist of elderly and low-income individuals. A large portion of these workers currently remain in jobs simply to avoid losing health care benefits that are offered through their employers. Once Obamacare is fully functional and has put a botched website unveiling in the past, these individuals will be able to get healthcare on their own, diminishing their reliance on employment-based medical coverage.

Not All Doom and Gloom for Obamacare Proponents

Proponents of Obamacare can breathe a sigh of relief, as the CBO stated that Obama’s signature legislation would not bring about the hiring freezes and forced layoffs that worried conservatives. The average profile of the CBO’s 2.3 million workers is an elderly person, who would formerly have worked until reaching Medicare eligibility, but now has the option to retire earlier with coverage under Obamacare. The key here is that individuals who opt to exit the labor force will leave the market-moving unemployment rate unchanged.

The true labor force effect will be based on how many people actually end up enrolling under the Affordable Care Act in coming years. Lost amid the doom and gloom posited by the CBO estimate are the potential benefits of Obamacare enrollment. Some believe that workers will now be able to choose jobs more fit to their skill set, increasing productivity of the labor force, and that many Americans will possess greater amounts of disposable income as they allocate less money toward health care. Likely, the figure of 2.3 million will be overstated, as incentives are highly theoretical. The choice to work more or fewer hours is less fluid in the real world and there are millions of Americans waiting to fill positions newly vacated positions.

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