The Affordable Care Act and the Labor Market: A First Look
October 16, 2015
A recent study examined the effects of the Affordable Care Act (ACA) on the labor market by comparing places that were expected to be affected by the ACA substantially (with a large percentage of uninsured before the law) with places that the ACA was expected to affect less.
Supporters of the ACA claimed that by limiting the extent of adverse selection in the nongroup market, the ACA would stop seeking jobs that offer health insurance but that don't have a comparative advantage for them and thus, make labor markets more efficient.
Opponents of the law argued that the structure of the insurance subsidies envisioned by the law created disincentives to work and that the mandate on medium-sized employers to provide insurance to full-time workers encourages the substitution by part-time workers.
The study found that:
- More exposed states and counties have experienced a rise in employment, salaries and output relative to less exposed areas with the implementation or the enactment of the ACA.
- However, in spite of not having an adverse effect on labor markets, major parts of the ACA, such as the employer mandate and the tax on high-premium plans still have to come into force.
While it is encouraging to find that the ACA does not appear to have substantially slowed the economic recovery or hurt it in its first year of implementation, its long-run impact on the U.S. economy remains to be seen.
Source: Maxim Pinkovskiy, "The Affordable Care Act and the Labor Market: A First Look," Federal Reserve Bank of New York, October 2015.
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