Among the arguments of those advocating repeal of the Affordable Care Act (ACA) is the claim that the law will increase unemployment in an already fragile U.S. economy because the requirement to provide health insurance or improve existing benefits will increase employers’ labor costs. This brief from the Robert Wood Johnson Foundation examines how the law will impact labor costs and the demand for labor.
The brief's Urban Institute authors—John Holahan, Ph.D., and Bowen Garrett, Ph.D.—conclude that the ACA will not have a noticeable effect on net levels of employment for three key reasons:
- The law’s net new expenditures are too small, relative to the overall size of the U.S. economy, to have much of an effect on employment.
- Offsetting effects—the expansion of coverage through Medicaid and income-related subsidies in the exchanges—would likely increase employment in the health sector, countering negative effects of Medicare payment cuts and new taxes.
- The new law will not affect most firms—either because they already provide health insurance meeting the new federal standards, or they are exempt from the new requirements because they employ fewer than 50 workers.
The authors note that there are many other forces, such as monetary and fiscal policies, that are likely to have a much greater effect on future economic activity than health reform.