PRESIDENT Barack Obama has made “income inequality” a political focus, decrying the gulf between rich and poor. Yet the president’s chief legislative accomplishment — Obamacare — could actually increase that gap.
Recently, the Congressional Budget Office determined Obamacare would reduce work hours by an amount equivalent to 2 million fewer jobs by 2017. Under Obamacare, many poor Americans could lose insurance subsidies or Medicaid eligibility if their incomes increase. Since the extra cash would be less than lost government benefits, the CBO predicts many individuals will turn down work.
Democrats tried to spin this as good news, saying it frees people from “job lock.” White House press secretary Jay Carney even claimed Obamacare would empower citizens “to make choices about their own lives and livelihoods, like retiring on time rather than working into their elderly years or choosing to spend more time with their families.”
Two recent reports paint a far different picture.
The CBO estimates Obamacare will lower aggregate labor compensation by about 1 percent, so Drew Gonshorowski, a policy analyst in the Center for Data Analysis at The Heritage Foundation, used economic modeling to determine the state-level impact. In Oklahoma, he estimates Obamacare will generate a 12.22 percent reduction in 2017 compensation for citizens with income at or below the federal poverty level (currently $11,670 for an individual). For Oklahomans earning between $11,670 and around $16,100, the health care law will lead to a 3.58 percent reduction in compensation.
Gonshorowski warns that shift creates other barriers to upward mobility.
“Since low-skill workers work less, they will gather less experience and not develop valuable skills that they need to move up the economic ladder,” he writes. “Work experience creates more human capital and leads to higher future earnings. As a result of less work, there is a reduction in human capital, and lifetime earnings will be permanently lower …”
The Heritage Foundation is known for advocating conservative policies, so some Democrats will undoubtedly dismiss its research. But a major labor union — one of the first to endorse Obama in 2008 — has reached a similar conclusion.
In a new report, “The Irony of ObamaCare: Making Inequality Worse,” officials with UNITE HERE (a culinary union) predict employers will behave rationally when faced with Obamacare’s perverse incentives. In future years when the employer mandate kicks in, businesses will face a choice: pay $8,000 to $12,000 per employee for coverage, or cut coverage and pay a $2,000 per employee fine. Given the economics of the hospitality industry, the report predicts a “strong temptation to dump lower-income employees.”
“For dropped employees, being pushed onto the exchanges will mean a major loss of income or health benefits,” the report says. “Families moving to the exchanges may lose between 4 percent and 25 percent of income to maintain equivalent benefits.”
The union also predicts Obamacare will shift workers to part-time labor. “The administration’s experts say employers won’t follow the incentives and drop coverage,” the report states. “But they also told the nation that employers would not cut workers’ hours to get below the 30-hour per week threshold for ‘full time’ work, even as 388 employers announced hours cuts since early 2012.”
White House officials would have voters believe Obamacare allows people to merrily pursue family time in lieu of work. In reality, the law may simply ensure many people continue to barely get by.