by David R. Henderson
February 25, 2014
When Obamacare was being debated, critics pointed to a bad disincentive within the law. Obamacare included large subsidies for low-income people to enable them to buy government approved health insurance plans. Yet, the government would phase out the subsidy as a low-income family’s income rose. Some economists argued that reducing the subsidy as people earn more would act like a tax on income and, thus, would reduce the incentive to work. Recently, a Congressional Budget Office (CBO) study came out claiming that by 2024, Obamacare will reduce the number of hours worked in the economy by the equivalent of about 2.5 million full-time jobs. Now, two well-known economists who support Obamacare admit that Obamacare will reduce employment, but they argue that this cutback in labor supply would be a voluntary choice of workers and thus a good. As we shall see, that conclusion is far from clear-cut.