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The CBO, the ACA, and Labor Market Effects: An Overview for Business Owners

On February 4, 2014, the Congressional Budget Office (CBO) released a report which estimates the labor market impact of the Affordable Care Act (ACA).  Since then, some sensationalized (and misleading) headlines regarding the report have been published.  So, what should business owners and decision-makers really take away from the CBO report?  Here’s a synopsis:

The law will not cut 2.3 million jobs. 

One of the most oft-cited numbers in the report is an estimate that the ACA will reduce the number of full-time workers in the labor force by 2.3 million.  This is about workers’—not employers’—choices.  Many people currently remain employed full-time largely to maintain health benefits with their employer.  The decline in full-time workers may include mainly lower-income workers who could be eligible for Marketplace subsidies.  According to the CBO,  the “estimated reduction stems almost entirely from a net decline in the amount of labor that workers choose to supply, rather than from a net drop in business’ demand for labor.” This is a crucial distinction.

There has been no trend toward moving workers to part-time as a result of the ACA. 

There has been a great deal of talk about the possibility that employers will begin moving more of their workers to part-time status as a result of the ACA.  However, there has been little evidence of this trend. Some employers, of course, have chosen to make this move.  The minimal shift which has occurred may be attributable to other post-recession economic factors, and has not been tied to the ACA.  In fact, the CBO report indicates that there is “no compelling evidence that part-time employment has increased as a result of the ACA.”

Here are a few additional resources on this topic:

More detail on this topic from MI Health Answers

The full CBO report

A White House statement regarding the CBO report

Fact-check regarding the CBO report from the Washington Post

Have questions?  Post them at www.mihealthanswers.com, or email them to advisor@mihealthanswers.com.

This post was contributed by Shannon Saksewski (Health Education Program Manager, Detroit Regional Chamber).  Shannon can be contacted at ssaksewski@detroitchamber.com.