Losing or leaving a job?

While they may sound the same, there is a substantial difference between “reduction in the supply of labor” and “Americans losing their jobs.” The first statement is something brought up in the latest CBO report. But many Republicans are using the second phrase to describe it.

The most basic difference between the two is that a person cutting back from full-time to part-time will create a “reduction in the supply of labor,” but obviously is not losing their job. More importantly, though, the report is referring to people who choose to work less, not those who are offered less work by their employer. Obviously, this is important. Rather than evidence that healthcare reform is the disaster Republicans have been hoping for, it’s evidence that healthcare is doing what it was intended to.

Let me explain. We had a system where health insurance is connected to full-time work by both group bargaining and tax incentives. So people with healthcare needs didn’t just need money to buy health insurance, they needed a job that provided health benefits. For example, a young couple has two full-time jobs. One wants to reduce their hours to take care of kids, but their spouse’s job does not offer health benefits. Or consider a person near retirement who keeps working because they wouldn’t be able to get health insurance if it wasn’t provided by their job.

The ACA (Obamacare) allows people buying insurance for themselves benefits similar to those provided by a job. The result is people who were working full-time only for health insurance are now free to reduce their hours or retire. Those are the people the CBO report is talking about when it talks about reduction in the supply of labor. And that’s why it’s a good thing. People being trapped in full-time jobs only because there was no other way for them to receive healthcare was a problem. It’s a good thing that it is being fixed, and the huge number of people changing their work status is evidence not that Obamacare is hurting people, but that this problem was larger than we realized, and fixing it is helping more people than expected.

Also, as noted here by Politifact, this effect of allowing people to retire or reduce hours will create room for the long term unemployed and those who have given up on working to get jobs. Which makes sense. We are still in an economy with more job seekers than jobs, so allowing people to work less if they want to will mean more available work for those who are looking for it. That means that in the next few years this effect will likely aid recovery; it will only start to reduce GDP after unemployment has improved.

Or, to put it in economic terms, this is a reduction in the excess labor supply. It may even help counterbalance the insufficient demand for labor.


One response to “Losing or leaving a job?

  1. Your content is very valuable, I like, thank you for sharing

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