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.

Comments (13)

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  1. August says:

    “Economists understand this premium assistance to be a subsidy to layoffs, making them cheaper and less of a burden”

    I just want to point out that a subsidy to layoffs will create a more flexible labor market (a good thing). But the taxpayer will bear the cost (a bad thing)

    • Ryan says:

      How does the subsidy to layoffs create a more flexible labor market? Do you know the economics behind this argument? I don’t quite understand it.

    • Samir says:

      While it may create a more flexible labor market, by allowing more space for up and coming graduates etc., the negative effects on the taxpayer have multiple adverse effects on the economy that may outweigh the benefit provided by incentivizing retirement.

  2. Tom says:

    Interesting. Don’t know if the average taxpayers would be happy with bearing the cost of, say, someone who would qualify for insurance already under their spouse’s plan.

    • Dewaine says:

      The taxpayers shouldn’t be happy. What would be the motivation for covering these people?

    • bart says:

      They’re already subsidizing the spouse. Why should they feel any different about subsidizing anyone else?

  3. George says:

    I don’t think it will burden taxpayers at all the government isn’t going to suddenly increase taxes they are going to increase their deficit and therefore debt, which might cause the U.S. to be unable to pay the costs to maintain the debt which in turn will lower the U.S. credit rating and harm us substantially in the long run.

    • Dewaine says:

      So, just future taxpayers.

      You are probably right, we all seem to desire enormous pain down the road instead of bearable pain now.

  4. Devon Herrick says:

    A couple years ago the CBO estimated that perhaps 700,000 people would voluntarily leave the workforce due to provisions in the Affordable Care Act. Middle-aged people would seek early retirement because they no longer needed a job to: 1) have access to a community rated health plan; 2) pay the high costs of a retiree health plan.

    The CBO didn’t quite put it this way, but the health insurance exchange meant that some early retirees would get the equivalent of a $20,000 subsidy from the government. By contrast, a couple of early retirees would have needed about $3,000 extra per month in earned pre-tax income to equate the same level of income. That’s a huge difference.

  5. JO JO says:

    “Thus, we are about to begin a federal program that subsidizes layoffs to a degree that we have not seen before.”

    – This should be interesting.

  6. bart says:

    We’re already spending 200-300 billion subsidizing healthcare for people who have incomes and presumably don’t need it, with the highest subsidies going to the highest incomes. Why shouldn’t anyone else enjoy comparable subsidies?

    Of the many things wrong with the ACA, this isn’t one.

  7. Bob Hertz says:

    I do not quite track what Devon is saying about a $20,000 subsidy, but let me raise two points about early retirees leaving the work force:

    a. if a person has been in the labor force for 40 years and is only working to get health insurance, and that person can now quit, that does not strike me as a bad social consequence. 40 years is enough.

    b. When older persons quit, at least some of their jobs become open to younger persons. This also seems to be a decent social consequence.

    I read a fair number of futurists, and virtually all of them say that the world of the future will have fewer traditional good jobs. We will have to give people money not to work, if not out of compassion then realistically to prop up consumption.