Point of View

Both parties appeal to emotions on the effect of Obamacare on jobs

March 13, 2014 

The Congressional Budget Office recently indicated that as many as 2.3 million fewer jobs will be available by 2021 as a result of Obamacare, including up to 75,000 jobs specifically in North Carolina. Various political interests quickly seized on the predictions to support specific positions.

For Republicans, the figures indicated that more than 2 million jobs will be “lost.” Democrats took a positive view that the CBO is predicting that 2.3 million fewer workers will choose to work.

Essentially the Democratic argument goes like this: Because Obamacare makes health care insurance more available to people with pre-existing conditions, more than 2 million people who are currently forced to work to maintain insurance will now have flexibility to leave jobs and live happier lives. What could be wrong with that?

Trying to be accurate, the CBO said its prediction was due primarily to “a net decline in the amount of labor that workers choose to supply, rather than from a net drop in businesses’ demand for labor.” The CBO clarified that it predicted a loss of work hours equating to 2.3 million full-time jobs, but that the hours may be spread over more than 2.3 million workers reducing work by something less than full-time employment.

Unfortunately, this is about as clear as this debate gets. The problem is that when it’s looked at rationally, both sides are actually correct – and wrong.

If a worker won the Power Ball jackpot and chose not to work, it’s fantastic for the individual. However, the question becomes whether his employer feels a need to replace him by hiring another worker or whether the employer sees an opportunity to reduce payroll expenses through attrition by not hiring a replacement worker. This is the question that can’t be clarified, making both sides correct and wrong at the same time.

For Republicans, if the employer chooses not to hire a replacement then the job is certainly “lost,” but the demand for labor goes down with the reduced supply of labor. The unemployment rate is essentially unchanged; it doesn’t go up as charged. For Democrats, if the employer does not hire a replacement, a job is certainly “lost,” in conflict with their claims, although the unemployment rate is essentially unchanged just as they and the CBO claim.

In other words, both sides make the claim that has the greatest emotional effect for their position: Democrats say individuals will be happier (correct) but no jobs will be lost (likely inaccurate). Republicans say jobs will be lost (likely correct) and unemployment will increase (inaccurate).

The rhetoric is especially confusing in this debate, with no side having a solid claim on accuracy. The impact will depend on an employer’s hiring decisions – which rely on demand for products – that then determine whether there will be demand for workers. If the economy since 2007 is any indication, the gain in individual worker flexibility is unlikely to lead to many employers refilling positions.

Despite some individual benefits, the CBO predictions are most likely going to serve only one political objective that we’ve already witnessed – demagoguery. Societal benefits do not appear in the predictions.

Dr. Frederick Parker is a teaching assistant professor of economics at N.C. State University.

News & Observer is pleased to provide this opportunity to share information, experiences and observations about what's in the news. Some of the comments may be reprinted elsewhere in the site or in the newspaper. We encourage lively, open debate on the issues of the day, and ask that you refrain from profanity, hate speech, personal comments and remarks that are off point. Thank you for taking the time to offer your thoughts.

Commenting FAQs | Terms of Service