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Author: albaby1 Big gold star, 5000 posts Top Favorite Fools Feste Award Nominee! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 1947376  
Subject: Re: On ACA and "freedom" to leave your Date: 2/6/2014 4:31 PM
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So we are not talking about 'otherwise productive people' quitting work simply because of cheaper health care. These are people who don't need to work? People who ONLY work to pay for health care?

Even if I got free health care (I did at one point) I would still work. Who is in such a position? It certainly can't be a broad brush statement that says Obamacare is a disincentive to work across the board.


The disincentive would apply across the board, but the CBO found that only a discrete percentage would respond to it by changing behavior - the equivalent of 2-2.5 million FTE workers. Basically, there are two effects - income and substitution - and it's helpful to look at the impacts separately.

The income effect is pretty basic: as a very general matter, people view "leisure" as a valuable economic good, so when they are wealthier they will consume more of it, because they can. So if one of your basic needs is now being paid for by someone else, you have the ability to consume more leisure without reducing your quality of life.

The substitution effect is that the changed incentives reduce the marginal value of work vs. leisure. Put simply, the income thresholds for both subsidies and Medicaid eligibility mean that if you earn more, you put less in your pocket - because the extra earnings come with a loss of subsidy/eligibility. Near the 'cliffs' in the subsidies, you can even see negative marginal earnings - where earning an extra $1K means you lose more than $1K in subsidies.

While most people will be in positions that they don't change their behaviors in response to the above, some people will be in positions where they will work less or quit the workforce. If you're lower-income and near one of the thresholds where eligibility is cut off, it might not even be a choice to work less - you might not be able to afford the loss of subsidy that comes with a higher nominal paycheck. Some people who were working primarily in order to provide for their health care payments might choose to leave the workforce and take the free healthcare instead. And some people will find their choices in future employment constrained by the negative consequences of increasing their earnings (either joining the workforce or moving up) - "ACA lock" instead of "job lock."

Albaby
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