Tags: Blinder | Obamacare | job | growth

Princeton Economist Alan Blinder: Obamacare Isn't a 'Job Killer'

Wednesday, 12 Feb 2014 07:47 AM

By Dan Weil

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While the Congressional Budget Office (CBO) estimated last week that Obamacare may cut job growth by as much as 2.5 million jobs during the next three to 10 years, that doesn't mean "Obamacare is a job killer," Princeton University economist Alan Blinder writes in The Wall Street Journal.

"The CBO makes it crystal clear that its analysis suggests that U.S. labor supply, not labor demand, would likely be reduced by various provisions of the ACA [Affordable Care Act]. Fewer sellers, not fewer buyers. That means, for openers, that the ACA should raise wages, especially low wages," he explains.

"More germane to the political brouhaha, it also means that the decline in work does not mean jobs being destroyed but rather that some people are choosing to work less — or not at all. That doesn't sound so bad."

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Labor supply will drop partly because the health insurance subsidies will make their recipients, mostly people with little wealth, better off, says Blinder, former vice chairman of the Federal Reserve.

"Some of them will take part of their newfound largess in the form of what economists call 'leisure time,' which could mean staying home to care for a sick child or parent," he notes

"Notice that working less helps them, not hurts them, even if GDP grows a tad slower, Blinder adds. "This negative effect on labor supply is generic; it applies to virtually every transfer program, be it Social Security, Medicaid or unemployment insurance."

But CBO director Douglas Elmendorf said in Congressional testimony last week that falling labor force participation "is the central factor in slowing economic growth," Real Clear Politics reports.

To be sure, it's not just Obamacare that will restrict the participation rate, but it's a factor, he says.

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