ObamaCare May Cause Decline in Employment

July 17, 2013

In a new study for the National Bureau of Economic Research, researchers Craig Garthwaite, Tal Gross and Matthew J. Notowidigdo study the effect of public health insurance eligibility on labor supply by exploiting the largest public health insurance disenrollment in the history of the United States.

  • In 2005, approximately 170,000 Tennessee residents abruptly lost public health insurance coverage.
  • Using both across- and within-state variation in exposure to the disenrollment, the authors estimate large increases in labor supply, primarily along the extensive margin.
  • The increased employment was concentrated among individuals working at least 20 hours per week and receiving private, employer-provided health insurance.
  • They explore the dynamic effects of the disenrollment and find there was an immediate increase in job search behavior and a steady rise in both employment and health insurance coverage following the disenrollment.

The results suggest a significant degree of "employment lock" -- workers employed primarily in order to secure private health insurance coverage. The results also suggest that the Affordable Care Act -- which similarly affects adults not traditionally eligible for public health insurance -- may cause large reductions in the labor supply of low-income adults. Indeed, the authors estimate that between 840,000 and 1.5 million childless adults in the United States currently earn less than 200 percent of the poverty line, have employer-provided insurance and are not eligible for public health insurance.  Applying their labor supply estimates directly to this population, the authors predict a decline in employment of between 530,000 and 940,000 in response to this group of individuals being made newly eligible for free or heavily subsidized health insurance.

Source: Craig Garthwaite, Tal Gross and Matthew J. Notowidigdo, "Public Health Insurance, Labor Supply, and Employment Lock," National Bureau of Economic Research, July 2013.

 

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