It’s simple: Climbing the opportunity ladder into the middle class or higher requires a job. And there’s your trouble with the Affordable Care Act. It slaps working class and low-income families with a big tax increase if they try and climb that ladder. Higher incomes are offset by lower insurance subsidies from government. As a result of steep effective marginal tax rates, some people will work fewer hours. Other will quit the job market completely.
Obamacare supporters call that a feature not a bug. People who are only working to pay for health care will now have the ability to make a different “choice.” Older workers doing physical labor will be able to retire earlier. Moms can switch to part-time work or even stay home full-time. Workers will have more flexibility to change jobs or start a business. So it’s good news … wait … fantastic news that the Congressional Budget Office now says that “more than 2.5 million people are likely to reduce the amount of labor they choose to supply to some degree because of the ACA,” three times more than its earlier forecast.
I kept my mouth basically shut on the Obamacare jobs loss issue. I had stated, many times, this is a labor market segmentation issue. The number of wage settings in the labor market reduce so the transaction cost of Obamacare are minimized. The rungs on the labor ladder are farther apart and harder to limb. From Shannon theory, the uncertainty level has increased, so the labor market dimensionality drops by one. The economy can compensate, for a cost. That cost? If the economy wants 3% accuracy and Obamacare can only deliver 8%, then no problem, to a 3% accuracy the economy will compute the skew and run a hedge channel. Total accuracy, over all, will drop; as measured over a much larger set of labor trades. The costs is 3% multiply by the size of Obamacare subsidies in share of GDP.
Total cost of Obamacre? Roundaboutness cost because of skew in the political districts, and subsidy costs; both costing 3% times share to fix.
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