AL Senate Set to Vote on Budget Resize

How the ACA Will Affect Alabama Labor

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As the provisions of the Affordable Care Act (ACA) continue to be implemented, there are now more signs that the Administration’s labyrinthine healthcare program has the potential to cripple the vulnerable populations it had originally promised to help.  Earlier this year, the nonpartisan Congressional Budget Office (CBO) issued a report estimating the effects of implementing the ACA on the national labor market.  According to their findings, once the major provisions of the ACA are fully enacted in 2017, employers will reduce the number of hours worked by their employees by between 1.5% and 2%, “almost entirely” in the CBO’s own words, “because workers will choose to supply less labor—given the new taxes and other incentives they will face and the financial benefits some will receive.”  The CBO predicts the corresponding reduction in wages will be less severe—about 1% of all wages by 2024—but only because the largest reductions in labor hours are expected to be among low-wage workers, one of the groups the ACA was originally touted as helping the most.

When the CBO’s estimates are applied to Alabama’s labor market, the growth in hours worked and total wages paid in the state will not stop, but it will slow.  Prior to the release of the CBO’s report, the U.S. Bureau of Labor Statistics (BLS) estimated the number of paid hours worked by Alabamians will grow from 3.65 billion hours in 2012 to almost 4 billion hours in 2022, and that the salaries paid for this work would increase by almost $8 billion over the same period.

By hobbling both the economy and human potential, the ACA is yet another form of government assistance that perpetuates lifelong government dependence.

Once most of the ACA is implemented, the upward trajectories of both paid hours worked and salaries will be blunted.  Specifically, Alabamians are projected to work between 155 million and 207 million fewer paid hours between 2017 and 2022.  At the same time, more than $2 billion in wages will be lost that would have been realized had the ACA not been passed.

Another way the CBO calculated the effects of the ACA on the national labor market was by converting the number of lost paid hours into the equivalent of full-time jobs.  Using the same calculations for Alabama’s labor force, the reduction of more than 150 million paid work hours would be the equivalent of losing between 22,700 and 30,300 jobs between 2017 and 2022.  To put this number in perspective, the BLS estimates about 20,000 new jobs per year will be created in Alabama between 2012 and 2022.  With the implementation of the ACA, the equivalent of more than a year’s worth of new jobs will be lost between 2017 and 2022.

One of the most tragic findings of the CBO report was that the largest declines in labor supply would be among lower-wage workers.  In an economy that already cannot supply adequate employment opportunities to the unemployed and the underemployed, the ACA will only make this problem worse.

In a perverse twist, the ACA creates a disincentive to work because as income increases, government benefits decrease.  Even if an individual manages to hold more than one part-time job with fewer hours to earn what they might have made several years ago with only one job, the taxes and fees associated with employers providing healthcare coverage under the ACA likely means none of them will offer insurance, making the choice to remain underemployed but still insured a tempting option.  By hobbling both the economy and human potential, the ACA is yet another form of government assistance that perpetuates lifelong government dependence.

Dr. John Hill is senior policy analyst at the Alabama Policy Institute, an independent, non-profit organization dedicated to defending and promoting free markets, limited government, fiscal responsibility and strong families through in-depth research and analysis of Alabama’s public policy issues.  If you would like to speak to the author, please call 205-870-9900 or email [email protected].

 Note: This column is a copyrighted feature distributed free of charge by the Alabama Policy Institute (API). Permission to reprint in whole or in part is hereby granted, provided the author(s) and API are properly cited.

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