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Obamacare Could Shrink Workforce by 900,000

By Michael Gray

Currently, the most widely opposed piece of legislation in Obama’s presidency, the Affordable Care Act (Obamacare), is receiving new criticism from the National Bureau of Economic Research, an independent think tank. The study, named the “Public Health Insurance, Labor Supply, and Employment Lock, explored the possible consequences of low-income Americans (those making under $22,000 a year) with no dependents and their eligibility for state sponsored health insurance. The number of encompassing Americans ranges from 850,000 to 1.5 million.

Over the course of the study, it was determined that the vast majority of this populace remains at their current workplace solely for the benefit of health insurance. Many of these jobs could be classified as ‘undesirable’ due to their demanding nature and limited earnings. It is the combinations of these two aspects that have lead the authors of the study to speculate that a sharp decline in employment, or significantly reduced hours, would appear within this income bracket. According to the study, all of these numbers would be triggered by the voluntary actions of those eligible, as it will become the path of least resistance to work less, forgoing employer-provided insurance and receiving socialized healthcare.

The study analysis suggests:

“Applying our labor supply estimates directly to this population, we predict a decline in employment of between 530,000 and 940,000 in response to this group of individuals being made newly eligible for free or heavily subsidized health insurance […] This would represent a decline in the aggregate employment rate of between 0.3 and 0.6 percentage points from this single component of the ACA.”

John Davidson of the Texas Public Policy Foundation responded optimistically, stating:

“Freedom from employment lock’ could also have the effect of encouraging people to take economic risks, such as starting a small business or some other entrepreneurial venture,” Davidson said. “If they can get health insurance elsewhere, they are likely to engage in economic activity in some other way rather than drop out of the workforce entirely.”

Essentially, subsidized health insurance, guaranteed under Obamacare, will tempt those living below the poverty line to drop out of the workforce entirely as the benefits from their employer become obsolete. As the starting date of Obamacare has been pushed back until after the 2014 midterm elections, the chief effects and consequences of the legislation remain elusive. At this point in time, 24 states have opted out of the Medicaid expansion portion of Obamacare.


Boehm, Eric. “Study: Obamacare Could Shrink Workforce by 900,000.” TheStreet. Buisness News, 1 Aug. 2013. Web. 04 Aug. 2013.

Garthwaite, Craig, Tal Gross, and Matthew J. Notowidigdo. “PUBLIC HEALTH INSURANCE,LABOR SUPPLY, AND EMPLOYMENT LOCK.” Columbia University. N.p., n.d. Web. 4 Aug. 2013.

Luhby, Tami. “States Forgo Billions in Federal Cash by Opting out of Medicaid Expansion.” CNNMoney. Cable News Network, 01 July 2013. Web. 04 Aug. 2013.

Michael Gray is a We Are 1776 contributor.