Two Ways in Which Obamacare Makes Work Less Likely

A blog about business and economics.
Feb. 10 2014 10:20 AM

Two Ways in Which Obamacare Makes Work Less Likely  

465648099-representative-greg-walden-republican-of-oregon-and
Meh, I quit.

Photo by Saul Loeb/AFP/Getty Images

As the debate over the impact of the Affordable Care Act on labor supply continues, it's worth being excruciatingly clear about the fact that there are two distinct mechanisms through which a welfare state program can lead people to want to work less.

One way—which I don't think we should worry about even a teeny little bit—is that when people become richer, they become marginally less inclined to spend their time trying to earn more money and marginally more inclined to spend their time doing something else. That's why 21st-century people don't work such long hours as 19th-century people, it's why Social Security and Medicare let people retire, and it's the thing the Congressional Budget Office says will do the most to reduce labor supply when the Affordable Care Act is implemented.

The other way, which is absolutely worth worrying about, is that means-tested benefit programs operate as a de facto income tax. The boss asks you to pick up an extra shift per week. So you do the math. The bad news about working the extra shift is that you'll have to spend more time at work. The good news is that you'll have more money. But the value of that extra money is partially rolled back by the reduction in premium subsidies.

Advertisement

Those impacts are genuinely worth worrying about. In principle, you could avoid them altogether by making all social welfare programs flat benefits with no phase-outs. But of course it's no mystery why the Affordable Care Act phases out its subsidies. Eliminating the phase-outs would make the program much more expensive. When it comes to programs that are currently structured to avoid work disincentives, programs such as Social Security and Medicare, conservatives generally offer the criticism that it is wasteful to be spending so much money on welfare state programs for Warren Buffett and Bill Gates. After all, they hardly need public funding for their retirement.

There is merit to both viewpoints on the proper design of welfare state programs. You can either make them "excessively generous" and spend money on people who don't really need it, or you can create these phase-out issues. One nice thing about being a very strict libertarian is that you can make this dilemma go away by just saying that there should be no public programs to help anyone in any circumstances. One bad thing about adopting that viewpoint is you'll create a world with lots of avoidable suffering.

Matthew Yglesias is the executive editor of Vox and author of The Rent Is Too Damn High.

TODAY IN SLATE

Medical Examiner

The Most Terrifying Thing About Ebola 

The disease threatens humanity by preying on humanity.

I Bought the Huge iPhone. I’m Already Thinking of Returning It.

Scotland Is Just the Beginning. Expect More Political Earthquakes in Europe.

Students Aren’t Going to College Football Games as Much Anymore

And schools are getting worried.

Two Damn Good, Very Different Movies About Soldiers Returning From War

The XX Factor

Lifetime Didn’t Think the Steubenville Rape Case Was Dramatic Enough

So they added a little self-immolation.

Politics

Blacks Don’t Have a Corporal Punishment Problem

Americans do. But when blacks exhibit the same behaviors as others, it becomes part of a greater black pathology. 

Why a Sketch of Chelsea Manning Is Stirring Up Controversy

How Worried Should Poland, the Baltic States, and Georgia Be About a Russian Invasion?

Trending News Channel
Sept. 19 2014 1:11 PM Watch Flashes of Lightning Created in a Lab  
  News & Politics
Weigel
Sept. 20 2014 11:13 AM -30-
  Business
Business Insider
Sept. 20 2014 6:30 AM The Man Making Bill Gates Richer
  Life
Quora
Sept. 20 2014 7:27 AM How Do Plants Grow Aboard the International Space Station?
  Double X
The XX Factor
Sept. 19 2014 4:58 PM Steubenville Gets the Lifetime Treatment (And a Cheerleader Erupts Into Flames)
  Slate Plus
Slate Picks
Sept. 19 2014 12:00 PM What Happened at Slate This Week? The Slatest editor tells us to read well-informed skepticism, media criticism, and more.
  Arts
Brow Beat
Sept. 20 2014 3:21 PM “The More You Know (About Black People)” Uses Very Funny PSAs to Condemn Black Stereotypes
  Technology
Future Tense
Sept. 19 2014 6:31 PM The One Big Problem With the Enormous New iPhone
  Health & Science
Bad Astronomy
Sept. 20 2014 7:00 AM The Shaggy Sun
  Sports
Sports Nut
Sept. 18 2014 11:42 AM Grandmaster Clash One of the most amazing feats in chess history just happened, and no one noticed.