A new CBO report includes a somewhat startling stat: by 2024, the Affordable Care Act will reduce the the number of people doing full-time work by 2.5 million, compared to what it would have been otherwise. The report finds that this further shrinkage in America’s workforce will come entirely from people choosing to work less. The law “allows people to quit jobs they only still have because they are afraid of losing insurance”, says Karl Smith.
John Boehner, and many other Republicans, said the report shows the "devastating impact of Obamacare on jobs". However, Glenn Kessler writes that “the CBO, in its sober fashion, virtually screams that this is not about jobs“. It’s about a reduction in work hours, which doesn’t necessarily mean that people are leaving the workforce completely. The CBO report shows that Obamacare is a mixed bag for the economy, Josh Barro argues. Ultimately, he says, the law insures that people can “make work decisions without worrying about how those decisions affect their health insurance”, which is a good thing. In a second post, Barro also says the ACA will end up pushing wages up.
Brad Plumer thinks the big story from the report is the worsening outlook on the American economy over the next decade. Budget deficits through 2023 are going to be higher, by about $1 trillion, than the government estimated last year. Annual GDP growth is going to be slower — 2.1% on average if we’re lucky. Further, many jobs lost during the recession still haven’t come back, and some never will.
Why Americans aren’t coming back into the labor force isn’t clear. In a separate report, the CBO estimates that about half of the drop in the labor force participation rate since the recession — to 62.9% today from about 66% in 2007 — has to do with demographic trends, like aging workers retiring, while the other half is a mix of cyclical and permanent unemployment.
Two Fed researchers, Samuel Kapon and Joseph Tracy, theorize that demographics, coupled with an overheated labor market back in 2007, can explain a lot of America’s shrinking labor force. "In other words, they find that if you correct employment numbers to reflect our aging workforce, we’re a lot closer to full employment than previously thought -- 0.7 percentage points away, specifically.
Matthew Klein writes that Kapor and Tracy’s report “ignores the actual data we have on employment by age group”. For Klein, aging alone can’t explain why America’s labor force participation rate has fallen to near 30-year lows. Paul Krugman, meanwhile, finds that if you crunch the numbers his way, “around 40 percent of the decline is demographics, but the rest is cyclical, and that we’re still far below full employment.” -- Shane Ferro
On to today’s links:
Alpha
How hot money flows into and ends up abusing emerging economies - Izabella Kaminska
Charts
America's abortion rate is at a 30-year low - Sarah Kliff
Tax Arcana
The difference between beating and missing earnings at IBM: Dutch tax havens - Alex Barinka and Jesse Drucker
The Fed
The Fed's familiar predicament: spooking the market every time it tries to pull back - Tim Duy
Why monetary policy should ignore bubbles - Yichuan Wang
How econ PhDs took over the Fed - Justin Fox
Appointments
Microsoft names Nadella as its new CEO, Bill Gates steps down as chairman - Kara Swisher
Right On
Young bankers today "say they’re moved to mend the world using capitalism’s wisdom" - Max Abelson
Your Retirement Plans
AOL is leading the way to make 401(k)s worse for everyone - Jia Lynn Yang
Apple
What’s Apple building in there? (Hint: internet infrastructure) - WSJ
Wonks
"Kindreds, communes, feuds, and mating patterns in medieval France" - HBD Chick
Listicles
America's 10 most expensive insurance markets - Kaiser Health News
Crisis Retro
The tale of the national real estate market in six houses - NYT
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