Health Care, Welfare, Workfare, Jobs

Let me return for a moment to two familiar topics in this space: Employer-provided health insurance and declining workforce participation. (Try to contain your excitement!) Earlier this week, A.E.I.?s?James Pethokoukis?highlighted?a new study?exploring the potential downsides that Obamacare?s expansion of a non-employer-based insurance market might have for the workforce participation rate:

Our results suggest a significant degree of ?employment lock? ? workers employed primarily in order to secure private health insurance coverage. The results also suggest that the Affordable Care Act ? which similarly affects adults not traditionally eligible for public health insurance ? may cause large reductions in the labor supply of low-income adults.

Those ?large reductions,? the authors estimate, might cash out to somewhere between 530,00 and 940,000 Americans leaving the workforce altogether. They base this estimate on what happened in 2005 when Tennessee discontinued an expansion of TennCare, the state health care program: The discontinuation caused ?an immediate increase in job search?behavior and a steady rise in both employment and health insurance coverage,? the authors write, suggesting a strong link ? which they use to model the impact of Obamacare ??between the need for health coverage and the choice to join, stay in, or rejoin the workforce.

A similar impact on employment and job-seeking has been predicted by previous analyses of the health care law, as Reihan Salam points out. Now of course to many liberals this just strengthens the case for Obamacare: Here you have hundreds of thousands people working jobs they hate and would love to quit just to have some medical security, when our society is rich enough that they shouldn?t have to work a lousy, low-wage, labor-intensive 9-5 (or worse) just to have health insurance within their reach. As I wrote earlier this year, from a certain perspective the entire recent decline in labor force participation could be seen as an unlooked-for, bottom-up fulfillment of the Marxist dream of a world rich enough to make leisure available to the masses as well as the elite. But one need not go that far left to be untroubled by Obamacare?s impact on workforce participation: One could just assume (with Ezra Klein, for instance, and most of the center-left) that many of the people dropping out of the workforce would be near-retirees or people dealing with severe family health issues, rather than the kind of able-bodied workers whose declining workforce participation we should actually be worried about.

From a more conservative perspective, though, the possibility that, as Salam puts it, ?the expansion of subsidized coverage might prompt other workers with less compelling personal stories to retire or reduce their work hours,? does suggest one of the more plausible right-of-center cases in favor of employer-provided health insurance: Namely, the fact that a link between subsidized health insurance and steady work fits with the general conservative preference for tying welfare spending to employment, family and personal responsibility. From this point of view, the tax code provision linking insurance to employment is of a piece with work requirements in welfare programs, or the way the earned-income tax credit tries to reward low-wage workers for actually sticking with a job, or the way the child tax credit is only available to parents who actually pay taxes, and so on down a longer list of policies that tend to find favor on the right of center.

As my prior philippics against employer-provided insurance suggest, I think this case ultimately fails. First, because the subsidy for employer-provided insurance, at least as currently designed, is not actually a work-based welfare program: It?s a work-based middle-class entitlement whose real economic impact is ultimately regressive. Second, because health insurance (and especially health insurance as conservatives would design it) is fundamentally different from other means-tested subsidies: It?s a hedge against catastrophe rather than a subsidy for daily life, which makes it most valuable in precisely the contexts where you might be least able to find or keep a job. Third, because employer-provided insurance creates work incentives with one hand but takes from workers with the other ??because it first masks the true price of insurance, driving up the cost of health care overall, and then as those costs eat up wage increases it makes paychecks seem stagnant even when compensation is technically increasing. And then finally, because all employers don?t offer insurance, so an employer-based system necessarily discriminates against many low-wage workers, who can?t take advantage of the subsidy through no fault of their own?? and the only way to rectify that problem is to create a universal employer mandate that would discourage business owners from hiring the very workers who most need both jobs and assistance.

But if the work disincentives created by a shift toward a subsidized individual market aren?t sufficient to rescue the case for employer-provided insurance, neither should they just be dismissed or ignored. Rather, they tend to buttress Ramesh Ponnuru?s argument that we should be slow-walking that shift rather than trying to make it happen all at once, the better to deal with unexpected consequences as they arrive. And they also tend to buttress the broader point that however we design our health insurance system, we need other policies that make the choice to work seem?more rewarding, attractive and sustainable for Americans on the bottom looking up.

Source: http://douthat.blogs.nytimes.com/2013/07/17/health-care-welfare-workfare-jobs/

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