eliminating "job lock"

[FinanceGeek]

For a few years now, this forum has speculated about the number of people who will ER as soon as they can purchase health insurance policies not tied to employment. Now, the MSM is catching on to ACA as another thing that reduces the phenomenon of "job lock" with respect to health insurance.

A New Reason Not To Work | Daily Ticker - Yahoo! Finance

http://www.columbia.edu/~tg2370/gart...otowidigdo.pdf

The paper they base this on has little to do with ER as we discuss it on this forum, its mostly about the effect of "new" availability of HI due to ACA mandated Medicaid expansion. They conclude that the aggregate employment rate (which I think means something like labor force participation rate?) may fall between 0.3 and 0.6 percent. Which the paper states is in line with the 0.5% numbers estimated by CBO. But by focusing only on the segment of the population who will now be Medicaid eligible, I suspect both this paper (and CBO) greatly understate the likely decline in the labor force participation induced by ACA.

What these numbers don't capture are the (IMHO much larger) group of people who will take less demanding jobs, return to college, start new ventures, etc. once they are no longer compelled to work in traditional corporate organizations to get access to group health insurance despite pre-existing conditions.

With respect to the title, I recall elimination of "job lock" was widely bandied about as a reason to enact the COBRA law in the 1980s. And indeed, the world of even less HI portability pre-COBRA was far less worker friendly than what we have today.

[scrabbler1]

I am not troubled by a predicted decline in the labor force participation rate once Obamacare goes into effect bigtime next year because of people like me who choose to leave the labor force before they turn 65. Aren't we getting to more of an equillibrium when we have people who don't need to be working (i.e. only working for the HI) out of the workforce so that those who are not working can more easily get a job in their place? It's a win-win if I ever saw one. When I left my old job, I freed up a budget slot (or half a budget slot, as I was a part-timer) for a new hire who could not previously be hired due to no slots available.

[daylatedollarshort]

It will be interesting to see what the ACA does to retirement and full time employment rates. I would also bet that the divorce rate increases.

Workers will no longer be tied to full time jobs for health insurance and spouses will no longer be tied to spouses with full time jobs as the only way to get health insurance.

I like this video of a family with a tiny house, no mortgage and a cottage next door for a home business -

Shotgun shack redux: mortgage-free in 320 square feet - videos - *faircompanies


They make crafts they sell on Etsy for a living. With affordable health insurance not tied to full time employment, it makes living like this feasible for families who are into a low stress, simple living, your money or your life kind of lifestyle.

[FinanceGeek]

Quote:

Originally Posted by daylatedollarshort I would also bet that the divorce rate increases.

Its not just access to HI, the decision to get and/or stay married will also be influenced by subsidy mathematics.

I agree with scrabbler1 that it is likely to open up jobs...with the unintended consequence of higher taxes for those brave souls who are still in the workforce.

People respond to incentives, what government planner would have thunk of that!

[Buck2520]

Count me as one who is only going to be able to retire before age 65 because of the ACA and it's access to affordable health care. I would have to keep working and taking up a job without the ability to get health care at a reasonable cost. With reasonable health care cost I will be able to retire at 57 and free up my position for a younger man to support his family.

[bUU]

Quote:

Originally Posted by scrabbler1 I am not troubled by a predicted decline in the labor force participation rate

It didn't even occur to me that anyone would consider such a decline in a negative manner given that the decline would be attributable to people who explicitly wouldn't be struggling to make ends meet month-to-month and more generally would be people who would be back-filled along a chain leading back to entry jobs that would go to folks who had previously been struggling to make ends meet month-to-month.

Quote:

Originally Posted by scrabbler1 It's a win-win if I ever saw one.

That's my read. The only downside is that it makes participation rate less of a good measure of the health of the labor economy.

[daylatedollarshort]

Quote:

Originally Posted by FinanceGeek Its not just access to HI, the decision to get and/or stay married will also be influenced by subsidy mathematics.

Possibly, but how many people in the U.S., beside the kind of people that post here, really think like that. On other forums, a large percent of the posters don't really even know what the ACA is.

[Calico]

Quote:

Originally Posted by Buck2520 Count me as one who is only going to be able to retire before age 65 because of the ACA and it's access to affordable health care. I would have to keep working and taking up a job without the ability to get health care at a reasonable cost. With reasonable health care cost I will be able to retire at 57 and free up my position for a younger man to support his family.

Count me in too. With reasonable health care cost I will be able to retire before 65 and free up my position for a younger woman to support her family.

[ERhoosier]

Not sure that ACA is going to have that much net effect on labor market, particularly considering the "mandatory expansion of Medicaid" was struck down by SCOTUS. I doubt it's valid to use the study of demise of one state's comparatively generous Medicaid plan to predict effect of population-wide ACA on national employment behavior. COBRA helps those between jobs, and the majority of states already have some form of 'guaranteed issue' HI that goes beyond Federal HIPAA protections, with most including some premium caps in their high risk pools.
State by State Guide to Guaranteed Issue Health Insurance in 2012

Also not sure that ACA is going to be significantly more "affordable" for most moderate to higher income ER's after one considers HI premiums plus OOP max (>$12k, family) which is considerably higher than most existing HI plans. Clearly, the premiums subsidies will help those who qualify however I see those being scaled back drastically in near future as costs rise in face of ballooning fed deficit. IMHO- The ERs who would benefit most are those with significant pre-existing conditions who live in states lacking "guaranteed issue" protections. For them, the premium ratio limits & guaranteed issue will be quite helpful

[MichaelB]

Quote:

Applying our labor supply estimates directly to this population, we predict a decline in employment of between 530,000 and 940,000 in response to this group of individuals being made newly eligible for free or heavily subsidized health insurance. This would represent a decline in the aggregate employment rate of between 0.3 and 0.6 percentage points from this single component of the ACA.

The authors seem to be saying that there will be that many fewer jobs, not just people working who will quit and be replaced. If some left their jobs and were subsequently replaced, there would be no change in employment but there would be fewer unemployed individuals.

[FinanceGeek]

Quote:

Originally Posted by MichaelB The authors seem to be saying that there will be that many fewer jobs, not just people working who will quit and be replaced. If some left their jobs and were subsequently replaced, there would be no change in employment but there would be fewer unemployed individuals.

I read it as "between 530,000 and 940,000" fewer people trying to work, e.g. a decline in the labor force participation, not a decline in total employed. Early in the article they say this:

Quote:

Our results suggest that ACA-related decreases in labor supply among this group of low-income workers could reduce the aggregate employment rate by between 0.3 and 0.6 percentage points. Importantly, this predicted reduction would be driven by changes in labor supply and therefore would not necessarily imply a welfare loss for individuals choosing to exit the labor force.

So as another poster stated, perhaps a win-win.

As I said before, by focusing on low income medicare workers, they (and CBO) are really missing the point. Its the middle-aged LBYM "salaryman" (and women!) who I expect to leave the workforce. And I think they will leave in droves. I'd predict an order of magnitude higher percentage drop in the labor force participation (5%) versus what this paper is predicting.

[jollystomper]

Quote:

Originally Posted by scrabbler1 I am not troubled by a predicted decline in the labor force participation rate once Obamacare goes into effect bigtime next year because of people like me who choose to leave the labor force before they turn 65. Aren't we getting to more of an equillibrium when we have people who don't need to be working (i.e. only working for the HI) out of the workforce so that those who are not working can more easily get a job in their place? It's a win-win if I ever saw one. When I left my old job, I freed up a budget slot (or half a budget slot, as I was a part-timer) for a new hire who could not previously be hired due to no slots available.

Of course, the assumption is that those volunteering to leave the U.S. workforce will be replaced 1-to-1 (or close to that) by U.S. workers. However, I don't see the ACA as keeping corporations from continuing to reduce headcount, outsourcing jobs, or replacing the jobs with less costly workers. It will be interesting to see this unfold, but never disregard the Law of Unintended Consequences.

[comicbookgujy]

Most people need two jobs just to pay the bill.

ACA is good for the people on this forum though. I'm thinking of quitting and going part time when I don't have to worry about health care

[MichaelB]

Quote:

Originally Posted by FinanceGeek I read it as "between 530,000 and 940,000" fewer people trying to work, e.g. a decline in the labor force participation, not a decline in total employed.

Perhaps wording that was unclear, or I misread their intention. I don't know if the final number will be in their range of 1/2 million to 1 million, but it does appear a dozen or so of those are members here at ER Forum.

Good paper. Thanks for posting it.

[Jack_Pine]

I will be interested to see cost. Before the specter of ACA we had looked at buying policy off the street (Wisconsin). I only need it for me (DW will be 65). I could get a decent policy for around $600/month.

Not sure how much cheaper ACA will be. (not taking into account reduced reported income from investments)

[W2R]

As an early baby boomer who had to work two years past FI in order to qualify for retiree health insurance, I can sure sympathize with those younger than me who are otherwise FI but stuck working for health insurance reasons now.

It sounds like some of those who are younger than me will not be stuck like I was, and I am so happy for them. Those my age and older are now on Medicare, for the most part.

On the other hand, it is hard to get motivated to save when thinking that one has to work until Medicare before even considering retirement and this has been the situation for some time. I wonder if many younger folks are prepared to take advantage of the coming opportunities for health insurance in early retirement.

[Sesq]

I am an amputee that needs a new leg (retail $15k) every 3 - 7 years. This has given me something to focus on anytime I change jobs. I am in the "we'll see" mindset, but breaking the employer | health insurance would be a net plus. I think this is going to take ten years to shake out, and I think that was part of the design at passage.

[Ed_The_Gypsy]

One has only to look north to Canada to see how things might go. Their universal health care is either very low fee or no fee to the participants, depending on the province. (Of course, they do pay for it in taxes. There is a constant discussion of whether they are getting their money's worth. I was a very happy beneficiary of the system, however.)

Independent contractors are very common even in the professions, in stark contrast to the US. No 'job lock'. This even opens up more jobs as there is less of the burden involved when hiring 'permanent' staff.

I don't know what the numbers are, but it sure seemed like the divorce rate was much higher there. No 'marriage lock' either. There may be other reasons for this as well.

As noted above, you still have to pay the bills, so people still go to work.

[siamond]

ACA is not going to make me significantly change my decision-making or timeline for ER (plus my wife will keep working anyway and take over the family health coverage), but it certainly adds a certain layer of comfort while foreseeing bad/unlikely scenarios (e.g. my wife losing her job, none of us able to find a new job providing health benefits).

I can definitely see that it might indeed help convincing numerous people to take the ER plunge, and this does seem win/win for everybody as previous posters noted.

[ziggy29]

I hadn't planned on ACA for much for quite a few years, but then I got laid off in April. And suddenly it has made me realize that semi-retirement is easy at this point, and full retirement probably a possibility as well.