Tag: "unemployment"

As Many As 11 Million Workers — Maybe More — Have an Incentive to Work Less Because of the ACA

Business DiscussionUnder the Affordable Care Act, between six and eleven million workers would increase their disposable income by cutting their weekly work hours. About half of them would primarily do so by making themselves eligible for the ACA’s federal assistance with health insurance premiums and out-of-pocket health costs, despite the fact that subsidized workers are not able to pay health premiums with pre-tax dollars. The remainder would do so primarily by relieving their employers from penalties, or the threat of penalties, pursuant to the ACA’s employer mandate. Women, especially those who are not married, are more likely than men to have their short-term financial reward to full-time work eliminated by the ACA. Additional workers, beyond the six to eleven million, could increase their disposable income by using reduced hours to climb one of the “cliffs” that are part of the ACA’s mapping from household income to federal assistance.

Casey Mulligan at NBER.

Why the Labor Market Isn’t Recovering

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This graph is from Casey Mulligan, who explains:

Between 2007 and 2012, there had been little net change in the tax rate on full-time work because the 2011-12 payroll tax holiday largely offset the increases from SNAP and mortgage modification. I think this is an important reason that weekly work hours recovered from the recession much more quickly than employment has.

But a year ago the payroll tax holiday expired and, more important, beginning this week incomes earned will reduce the subsidies that families might hope to receive as part of the new insurance plans created by the Affordable Care Act.

For these reasons, the recovery of the workweek from the recession cannot be taken for granted.

What Paul Krugman Can Learn From Milton Friedman

Years ago Milton Friedman was asked at a conference what he thought about different schools of economics (Chicago school, Austrian school, etc.) Friedman replied, “There are only two kinds of economics: good economics and bad economics.”

I’m reminded of this by Krugman’s Monday column in which he asserts that there is a Republican economic theory of unemployment.

Here’s the world as many Republicans see it: Unemployment insurance, which generally pays eligible workers between 40 and 50 percent of their previous pay, reduces the incentive to search for a new job. As a result, the story goes, workers stay unemployed longer. In particular, it’s claimed that the Emergency Unemployment Compensation program, which lets workers collect benefits beyond the usual limit of 26 weeks, explains why there are four million long-term unemployed workers in America today, up from just one million in 2007.

Then he offers this assessment:

Proponents of this story like to cite academic research — some of it from Democratic-leaning economists — that seemingly confirms the idea that unemployment insurance causes unemployment. They’re not equally fond of pointing out that this research is two or more decades old, has not stood the test of time, and is irrelevant in any case given our current economic situation.

As we have pointed out before, the best work on this subject seems to be that of Casey Mulligan who writes for The New York Times economics blog. (That’s right, the very same newspaper that Krugman writes for!) Mulligan estimates that as much as half of the excess unemployment we are experiencing is the result of overly generous entitlements benefits.

And, no. I don’t know who Mulligan votes for.

One Reason Why So Many People Are Not Working

Here are Casey B. Mulligan’s estimates of the impact of emergency unemployment compensation ending in December 2013:

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Headlines I Wish I Hadn’t Seen

fraud-alertDid the Census Bureau fake the unemployment data prior the 2012 election?

Obama and the White House knew as early as this past summer that the health care website wouldn’t work.

While President Obama was telling the nation that only 5% of the population would lose grandfathered status, the Obama Justice Department argued in court that the administration internal estimates expect a majority of group health plans will have lost their grandfather status by the end of 2013.

Bruce Bartlett recounts the sordid history of how Republicans gave us Medicare Part D.

More on How ObamaCare is Affecting Jobs

Just over the weekend, Paul Krugman was again claiming that ObamaCare is not affecting the labor market in a blog post entitled Lies, Damned Lies, and Fox News. Yet Jed Graham notes that:

[R]eport after report has rolled in about employers restricting work hours to fewer than 30 per week — the point where the mandate kicks in. Data also point to a record low workweek in low-wage industries.

In the interest of an informed debate, we’ve compiled a list of job actions with strong proof that ObamaCare’s employer mandate is behind cuts to work hours or staffing levels. As of Oct. 17, our ObamaCare scorecard included 351 employers. (Full list is here.)

See previous post here. The effects seem more pronounced for small firms than for large ones (but remember: most larger firms are already providing health insurance). This is from a survey by the Foundation of Employee Benefit Plans (HT: David Beckworth):workforceadjust_hi

Is Disability Insurance Unemployment Insurance Under another Name?

2205696_com_disabilityMore generous unemployment benefits tend to elevate participation rates since workers must be looking for work to qualify. With disability insurance (DI), however, the opposite applies: to qualify applicants must generally demonstrate that they cannot work. In theory, disability and unemployment should not be correlated — and from 1966 to 1985 they were not, according to a new study prepared for the Brookings Papers on Economic Activity by Olivier Coibion and two others. But in 1984 DI eligibility criteria were eased so that applicants could qualify based on a combination of conditions rather than just one. Since then, highly subjective conditions such as back pain and mental illnesses have grown to account for most DI beneficiaries, and claims have become more correlated with unemployment (see right-hand chart). That strongly suggests that many workers find a way to qualify for DI when other benefits have been exhausted…

[T]his could explain between 31% and 59% of the decline in participation among 16-to-64-year-olds.

Source: The Economist.

Expect More Unemployment

Because of ObamaCare, that is. This is from Casey Mulligan:

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Work incentives for low-wage workers are eroded more than 10 percent of their compensation over the next couple of years, compared with 5 percent for midwage workers. Before the Affordable Care Act, the compensation for each additional hour of work by a low-wage worker, as with midwage workers, was split 50 percent, on average, for employee and 50 percent for the government. Under the law, it will be 39-61.

Will ObamaCare Subsidize Layoffs?

[U]nlike the Recovery Act’s program, [the Affordable Care Act] welcomes people out of work even if they left work by quitting, retiring or being fired for cause. It also welcomes people who have the possibility of joining a spouse’s plan and people who had no health insurance on their prior job.

Thus, we are about to begin a federal program that subsidizes layoffs to a degree that we have not seen before. Nevertheless, economic and budget forecasts by the Congressional Budget Office and others have yet to consider the effects of the layoff subsidy on the size of the program and the number of layoffs that will occur.

More from Casey Mulligan at The New York Times economics blog.

Headlines I Wish I Hadn’t Seen

Does the IRS have an “enemies list”?

The new, aggressive pathogens in China and Saudi Arabia may or may not carve a deadly path to the West; but sooner or later, you can be sure, one will.

41% of small businesses are postponing hiring because of ObamaCare law; only 9% think the law will be good for them.

The UN wants us to eat more insects.