Obamacare Could Cause Two Million additional Adults to Leave Labor Force

Daniel J. Mitchell
Posted: May 19, 2014 12:01 AM
Obamacare Could Cause Two Million additional Adults to Leave Labor Force

What’s the worst economic development during Obama’s reign?

Some would say it’s the higher tax burden.

Some would say it’s the wasteful faux stimulus.

Others would say it’s the fiscal nightmare of Obamacare.

And others would say it’s the loss of millions of workers from the labor force.

I suppose there’s no objective way to pick the most ill-conceived policy, but if you think the biggest problem is either Obamacare or falling labor force participation, then I have some very grim news that will confirm your fears.

According to new research, it appears Obamacare will drive many more people from the labor force. More specifically, the Medicaid expansion will alter – in a very destructive way – the tradeoff between labor and leisure.

Researchers Laura Dague, Thomas DeLeire, and Lindsay Leininger argue in a National Bureau of Economic Research working paper that Medicaid enrollment will lead to significant and lasting reductions in employment among childless adults. …Dague and her colleagues conclude that if the Medicaid expansion enrolls about 21 million additional adults, anywhere from 511,000 to 2.2 million fewer people will be employed. Furthermore, they argue that the Medicaid expansion will knock almost a full point off of today’s labor force participation rate — or share of the civilian population that is working — a measure of economic health that is already at its lowest point since 1977. …This research provides strong evidence for the contention that enrolling in Medicaid traps people in poverty and makes it harder for them to make their way into the middle class. Furthermore, it links the Medicaid expansion to the weakening of our nation’s economy.

By way of background, Medicaid is the federal government’s healthcare entitlement for (supposedly) poor people, while Medicare is the entitlement for old people. And, as part of Obamacare, the eligibility rules for Medicaid were dramatically weakened.

But the new research cited above shows that if you give people “free” health care, that makes them less likely to work.

Particularly when you combine that freebie with food stamps, housing subsidies, welfare, and other handouts.

That’s obviously bad news for taxpayers, who bear the direct cost of a bloated welfare state.

Welfare CliffBut it’s also bad for the less fortunate. They get trapped in a web of dependency, both because handouts reduce the incentive to work (humorously depicted here and here), band also because they face very high implicit marginal tax rates if they actually try to escape government dependency.

But Obama and other leftists probably see this as a feature, not a bug.

After all, those who are lured into being dependent on government presumably have an incentive to vote for those who give them the most goodies.