Obamacare Is A Terrible Jobs Progam

doctor-with-family(A version of this Health Alert was published by American Thinker.)

As congressional Republicans embark on their promise to repeal and replace President Obama’s signature Affordable Care Act, they are being overwhelmed by claims that imply it’s a jobs program.  Scholars affiliated with the Milken Institute School of Public Health at George Washington University estimate Obamacare repeal would kill 2.6 million jobs by 2019.  Almost a million jobs would be lost from health services, while the balance would be lost in construction, real estate, retail, finance, and insurance.

Unfortunately, such research relies on the so-called “multiplier effect,” a politically seductive but misleading type of voodoo economics.  It goes like this: Obamacare throws money at hospitals, doctors’ offices, and other health services.  Those recipients build new facilities and hire more workers, who spend their paychecks in their communities.  It is the same kind of research that developers seeking taxpayer-subsidized stadiums commission – and it is meaningless.

If Congress just sent a fleet of helicopters to scatter banknotes from the sky, the same “multiplier effect” would take place: people would pick the money up and spend it.  Businesses located near the drop zones would profit, hire, and expand.  However, jobs and the economy would not grow, because the effect would be a mix of inflation and reduced spending in areas away from the drop zones.

Worse, because this type of spending is politically motivated, it is usually demanded by industries which resist productivity improvements.  Last July, Dr. Bob Kocher, a venture capitalist who served as a special assistant to Obama when Obamacare was crafted, lamented that just over half of health service workers are administrators, up from just over one third before Obamacare.

Further, health services do not need Obamacare to add jobs.  The sector is recession-proof.  Nonfarm civilian employment peaked in January 2008 (at 138.4 million jobs) and bottomed out in February 2010 (at 129.7 million jobs).  Jobs were lost in 24 of those 25 months.  Nonfarm civilian employment did not cross the January 2008 threshold until May 2014.  And that recovery was not smooth: from June through September 2010, 289,000 jobs were lost in a jobs mini-bust.

However, there was no recession in health services.  Indeed, over half a million such jobs were added between January 2008 and February 2010.  In other words, health services added jobs while the Great Recession destroyed 9.25 million other nonfarm civilian jobs before the Affordable Care Act was passed in March 2010.

But Obamacare has skewed the American workforce toward health services.  This persists now that the economy has recovered.  By December 2016, the United States had added 6.87 million jobs to the previous peak in January 2008.  However, 2.59 million jobs are in health services, which grew by 20 percent.  All other nonfarm jobs grew only 3.42 percent, adding 4.29 million jobs.  Health services accounted for 38 percent of all jobs added from the January 2008 peak through the end of last year.  And this counts only private health services, not insurers and other middlemen or government employees added by Obamacare.

Republican politicians need to accept the fact that some industries can have too many workers and that health services is surely one of them.

Workers and businesses outside health care are paying the price for Obamacare with sluggish job and wage growth.  Health reform that focuses on patients’ needs, not preserving health service jobs fattened by Obamacare, will also help the rest of the economy.

Comments (14)

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  1. Lee Benham says:

    As I sit in the waiting room waiting for my wife’s first chemo treatment. I am amazed at the amount of people involved in the process. I guess if an industry is given over a trillion dollars a year in tax payer subsides efficiently dosent have to be a primary concern ….

  2. Ron Greiner says:

    Correct John, Obamacare repeal with Republican Health Care Reform will create jobs. Age-based tax credits will lift the cost off health insurance off the backs of employers and the economy will soar!

    America’s high health insurance costs are embedded into all products and services making them more expensive. Republican Reform will diminish the cost of products for Americans and make them more competitive on global markets so we will create more jobs.

    Republican Healthcare Reform will make America great again!

  3. Allan says:

    “Republican Healthcare Reform will make America great again!”

    Don’t count on it Ron. Many Republicans are missing the backbone and burying Obamacare makes a new healthcare plan that much more difficult to create. The ACA promised things while destroying a lot of intellectual infrastructure. Even those things it didnt’ deliver on will be expected.

    Lee, good luck to your wife.

  4. Barry Carol says:

    John G. – I disagree with you about the validity of the multiplier effect in healthcare. If you look at all the jobs in the economy, I contend that there are what I call primary jobs and there are derivative jobs. Primary jobs are those involved in the production of products and provision of services for which there is an international, national or at least a regional market. Examples include auto production, homebuilding, energy production, airlines, railroads, etc. Derivative jobs are those that primarily service the local population like the local gas stations, dry cleaners, restaurants, and the like. For major tourist meccas like Disney World, even the latter category can be primary jobs if most of the customers came from outside of the Orlando, FL area or wherever the tourist attraction is located.

    By contrast, dropping banknotes out of helicopters or throwing them out the back of pickup trucks in low income neighborhoods produces nothing of value. It just creates inflation. The extent to which healthcare or education for that matter can be made more efficient than it is now is a separate issue and debate. Areas with growing populations presumably need more healthcare capacity and more education capacity too. If we increase subsidies to help people who couldn’t afford them before access those services, it increases demand which creates the need for more workers in those fields. Doesn’t it?

    I estimate that each primary job ultimately creates at least 2.0 and perhaps 2.5 derivative jobs.

    • Devon Herrick says:

      If you dump bank notes out of a helicopter, people are free to decide where to spend their new found fortune. They will spend it at the region purveyors of the goods and services they enjoy. If you dump money into Medicaid or the ACA, you will create hospital jobs. The hospital workers will then spend their new found fortunes on the local purveyors of goods and services. They will also buy MRI machines from far flung places. But neither stimulus will have as much lasting effect as letting people decide where they want their money spent.

      Riding the train from Washington to Baltimore at the end of the day reveals how thousands of federal workers commute into DC for jobs. They are paid by our tax dollars. They employ home builders, pay for groceries, etc. These are things we all do. But I derive little benefit from my tax dollars being spent to employ a federal bureaucrat in Washington. So, yes, they do stimulate employment but the net benefit to the economy is not the same as if I could spend half my tax dollars on things that I want and the excess federal workers were instead employed in a field that does not rely on taxes taken from other to earn their pay.

    • I believe what you describe as “primary’ and “derivative” jobs economists would characterize as increasing specialization of labor and lengthening structure of production. Nevertheless, a person working in a hospital is not working in the technology industry or somewhere else that may be more productive.

      • Barry Carol says:

        John — You might want to take a look at an article published in the most recent issue of “City Journal,” the conservative Manhattan Institute’s quarterly magazine. The title of the article is “The Disrupters” by Gregory Ferenstein. It’s basically about innovations coming out of Silicon Valley that have created enormous wealth for a small number of people and put many thousands out of work in the process. Just one example: Netflix, with just 3,700 employees, put Blockbuster’s 9,000 stores out of business and its 60,000 employees out of work.

        These technology folks have an interesting take on how to provide at least the basics for all the people who lose their jobs as a result of technology and innovation. Who knows how many millions more will be put out of work as the technology around artificial intelligence and robotics continue to advance. It’s an interesting read.

  5. Lee Benham says:

    Barry,

    Are you arguing subsidies create more demand? A quarter ponder for $3 or a subsidized whopper for $1 . I can understand the increase desire for the whooper but not an overall increased in demand.

    • Ron Greiner says:

      Lee, when the Whopper is FREE, like Blue Cross healthcare with Obamacare, people will feed their dogs Whoppers instead of Purina which creates a feeding frenzy of demand for Whoppers.

      Whoppers is a little like Blue Cross and Obamacare.

  6. Paul Nelson says:

    The Power-Law probability Distribution concept applies predominantly to the character of healthcare economics: 5% of our citizens use 80% of its resources and 50% use 5% of its resources. We are consumed by our discussion of how to most efficiently manage the cost of the very high users. Correspondingly, we have NO means to structure the healthcare of our citizens who will eventually move out of the 5% low users and are at risk of unpredictably moving into the high users. So then, how can we activate the healthcare industry to form a national, community by community, strategy to establish a means to shrink the high users to 3% of the population that uses 70% of the resources. And, in so doing, stabilize the mid-curve users from 40% of citizens using 15% of the resources to 42% using 15% of the resources and improve the citizen health of 50% by using 10% of the resources. Bottom line, how do we manage the healthcare of the well-population to affect their evolving health in a manner to reduce the worsening rate of deterioration during an evolving catastrophic illness? The determinants for this are known. Many are not under the direct/immediate responsibility of the healthcare industry. Furthermore, many of these adversity determinants are uniquely community driven.
    .
    We can acknowledge at this moment, within this mini-reform community, the looming frailty of life from cancer. Correspondingly, healthcare reform must eventually have a better focus on life’s developmental and community attributes of HEALTH. Our nation’s worsening maternal mortality ratio for thirty years is the most egregious measure of this deficiency.

    • I would say the opposite. The political-policy community devours most of its time discussing coverage of maternity benefits, artificial contraception, preventive care for healthy adults, covering children (who could be against that?), leaving very few focused on the truly expensive patients.