The Congressional Budget Office estimates that the country’s labor supply will be 0.86 percent smaller in 2025 than it would have been without the Affordable Care Act. The full-time equivalent workforce will be about 2 million smaller than it is now, it says.
The office released a working paper Monday that says the labor supply will be reduced 0.8 percent by 2019, before rising to 0.86 percent, according to its projections of how people and businesses will respond to changes under the health law.
“Those estimates reflect CBO’s assessment of how workers, employers, and others will respond to the many significant changes that the ACA has made to federal programs and tax policies,” it reads. “Some provisions of the law will raise effective tax rates on earnings from labor — for instance, by phasing out health insurance subsidies as people’s income rises — and thus reduce the amount of labor that workers choose to supply.”
CBO expects the reduction to happen as some people work fewer hours, stay unemployed for longer than originally planned, or leave the workforce entirely. The provisions of the law that affect the labor market are those that expand coverage and impose explicit taxes or penalties.
Still, the report says that the estimates are uncertain because several of the factors on which they are based could change.
“In other words, the effect could be about 50 percent smaller or 50 percent larger than the agency’s central estimate because of potential variations in labor supply responses to the ACA’s provisions,” it reads.