CBO: Obamacare Will Lead To 2 Million Fewer Workers In The Labour Force By 2017

The Congressional Budget Office on Tuesday said that the Affordable Care Act will contribute to the equivalent of 2 million workers out of the labour market by 2017, as employees work fewer hours or decide to drop out of the labour force entirely.

The CBO revised much of its outlook on the Affordable Care Act in a new report released Tuesday.

From the report:

CBO estimates that the ACA will reduce the total number of hours worked, on net, by about 1.5 per cent to 2.0 per cent during the period from 2017 to 2024, almost entirely because workers will choose to supply less labour — given the new taxes and other incentives they will face and the financial benefits some will receive.

The reduction in the numbers of hours worked projected by the CBO will lead to the equivalent of 2 million fewer workers in the labour force in 2017. That number will rise to about 2.5 million in 2024. Previously, the CBO had estimated the equivalent of 800,000 fewer workers by 2021.

“Although CBO projects that total employment (and compensation) will increase over the coming decade, that increase will be smaller than it would have been in the absence of the ACA,” the CBO said in the report.

More from the report:

CBO has increased its estimate of the effect of a given reduction in aggregate compensation under the ACA on hours worked. CBO’s earlier estimate was based on a simplifying assumption that affected workers would have average earnings — in which case the percentage reductions in compensation and hours worked would be roughly the same. However, people whose employment or hours worked will be most affected by the ACA are expected to have below-average earnings because the effects of the subsidies that are available through exchanges and of expanded Medicaid eligibility on the amount of labour supplied by lower-income people are likely to be greater than the effects of increased taxes on the amount of labour supplied by higher-income people.

There is, of course, a disclaimer — the projections are subject to “substantial uncertainty” because of the broad, sweeping nature of a law that has yet to be fully implemented.

The CBO also revised its projection of 2014 enrollment in federal health exchanges, because of the early turmoil with the federal health exchange website HealthCare.gov. The office said that only 6 million people would likely sign up through the exchanges by a March deadline, down from an original projection of 7 million.

But the CBO expects the uptick in enrollment to continue for the next few years. By 2020, it said, only about 30 million people would be without insurance, down from 45 million this year.

Business Insider Emails & Alerts

Site highlights each day to your inbox.

Follow Business Insider Australia on Facebook, Twitter, LinkedIn, and Instagram.