Hey! Get off my lawn

Hamlet said:
Yes, I think it would make a lot of sense to smooth out those cliffs to make the incentives less perverse. I also think that if the exchanges work more or less as designed, it might make sense to consider dropping the employer mandate entirely so that we can inch towards getting employers out of the health insurance business at some point in the future.
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If HI costs keep going up there may be less and less impetus to drop the employer mandate. Employer-provided insurance will become less significant if businesses increasingly decide to pay the [-]fine[/-]/[-]tax[/-]/whatever and their employees have the option to go to the exchanges (and some will thereby get subsidies). If so, the "job lock" becomes even less of a problem and, as the national cost of providing the resultant subsidies will be escalating there will be little appetite for reducing the $$ gained from the [-]fine[/-]/[-]tax[/-]/whatever being paid by businesses. If all this comes to pass, it will just amount to an additional tax paid by medium/large American companies (with the resultant impact on their international competitiveness). Which brings us back to the discussion about jobs and where they come from.
 
Hamlet said:
it might make sense to consider dropping the employer mandate entirely so that we can inch towards getting employers out of the health insurance business at some point in the future.
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+1

If employers would simply stop providing HI coverage to employees while offering the necessary pay levels to attract and retain the people they would like to have on their team, job lock would be gone and labor efficiency would be greatly enhanced. The "employer mandate" promotes job lock.
 
It's pretty standard supply-side nonsense. He seems to think that having 20 people apply for a job instead of ten magically creates more jobs.

It's like saying soup lines caused the Great Depression.

There are times that you can end up constraining the economy by reducing the supply of labor. It would be bad to extend unemployment benefits when you've got 4% unemployment, for example.

There may come a time when the reduction of the labor supply constrains the economy, but one key symptom of when that is happening is wage inflation, which is pretty much non-existent right now.


NoMoreJob said:
There's an interesting opinion article in the WSJ today about the effect of the ACA on employment and why the CBO made adjustments to their projections in the recent report. The article can be seen here....

http://online.wsj.com/public/resources/documents/print/WSJ_-A015-20140208.pdf
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travelover said:
Interesting. Would this imply that countries with government supplied heath care are already "suffering" this side effect?
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Yeah. It turns out that most people interested in early retirement evaluate whether or not they are financially independent in terms of the locale where they intend to retire. I'm pretty sure the average English prospective early retiree doesn't include £1,000 a month for medical insurance for himself and the spouse.

Now the USAians, faced with guaranteed issue insurance and no more high risk pools with high rates and/or waiting lists, are beginning a demographical transition to a new equilibrium. This, as do many other changes, frightens or disturbs some people.
 
travelover said:
Interesting. Would this imply that countries with government supplied heath care are already "suffering" this side effect?
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It probably depends on the incentives their systems contain. Like the article points out, the hit to the US economy from the ACA is due to the way the incentives are structured. It's good that the CBO is agreeing with this, too bad they didn't do a more thorough analysis when it might have mattered more.

For those who haven't read the article, it is a profile of the work of an economist whose work helped the CBO come to their latest revised estimate of the employment impact of the ACA. It addresses the impact of subsidies, primarily, and says little about the whole "job lock" issue.

Hamlet said:
It's pretty standard supply-side nonsense. He seems to think that having 20 people apply for a job instead of ten magically creates more jobs.
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I doubt he thinks it's "magical." He might have noticed that having more unemployed people leads to lower labor costs (true), which makes it possible to have people do work that was not economically viable at higher labor rates (also true). Yes, having more unemployed people does create more jobs--not on a one-for-one basis, and not by magic, either.
 
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Do you think having falling wages during the crisis would have helped the economy, or actually done more damage?

Those lower wages mean lower spending, which means lower revenue for businesses, which lowers demand for labor as well. Those lower wages would have also meant higher rates of credit defaults as vast numbers of people making less money were unable to pay their creditors. Those creditors would then be unable to pay their creditors, etc, etc.

Deflation is death to an economy built on credit.

samclem said:
I doubt he thinks it's "magical." He might have noticed that having more unemployed people leads to lower labor costs, which makes it possible to have people do work that was not economically viable at higher labor rates. Yes, having more unemployed people does create more jobs--not on a one-for-one basis, and not by magic, either.
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youbet said:
+1

If employers would simply stop providing HI coverage to employees while offering the necessary pay levels to attract and retain the people they would like to have on their team, job lock would be gone and labor efficiency would be greatly enhanced. The "employer mandate" promotes job lock.
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But employers like job lock. After all a traditional defined benefits pension is another thing that locks one to a job, in particular after one is vested. (It is the final average pay formula in addition). The issue is keeping the 10-15 year experience contingent. So you have the HI job lock and the DB pension job lock. (After all a big part of the packages execs that move get is making them whole on their earlier pension i.e. paying as if the person had stayed at the original company and using the new final average pay.
 
travelover said:
Interesting. Would this imply that countries with government supplied heath care are already "suffering" this side effect?
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Not really, since in those countries how much one w@rks generally does not affect one's "universal" HC benefit. Under ACA "cliffs", if one w@rks a bit too much they can lose big $$ (HI subsidy).
 
Hamlet said:
Those lower wages mean lower spending, which means lower revenue for businesses, which lowers demand for labor as well.
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Even if we accept the demand-side economics argument (it's definitely losing favor: the old "Henry Ford paid his workers more so they could buy his cars" claptrap is dead and buried), it doesn't apply to this case because the same amount of raw dollars is being paid to workers, it's just being paid to a larger number of them when wages are lower and more people are hired to do formerly uneconomic labor. Fans of Keynes should cheer about this, because lower income workers spend a higher portion of their wages on goods and services (higher-income workers tend to invest or save their earnings to a larger degree). By their logic, if we want to drive up demand for goods, more workers earning less is better than fewer workers earning more.
 
meierlde said:
But employers like job lock.
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Absolutely. Traditionally, they have been able to provide HI and pensions in a special, preferential market that was not open to the employees as individuals, and if employees wanted to benefit from that they were locked in to that employer. So, pay was lower than it would otherwise have been.
Reducing the disparity between these preferential markets and what the employee can buy on their own (e.g. through HI exchanges, and with IRAs and other programs to allow "personal pensions") is a good thing for the efficiency of the US labor market and for national productivity.
 
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ERhoosier said:
Not really, since in those countries how much one w@rks generally does not affect one's "universal" HC benefit. Under ACA "cliffs", if one w@rks a bit too much they can lose big $$ (HI subsidy).
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Thanks for 'splainin' it. I see those cliffs getting rounded off in the future.
 
travelover said:
Thanks for 'splainin' it. I see those cliffs getting rounded off in the future.
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Sure hope you're right. And not just the 'cliffs' of ACA either, but for all gov't assistance programs. No one should loose ALL their assistance for earning just $1 more than some arbitrary & absolute threshold.
 
ERhoosier said:
Sure hope you're right. And not just the 'cliffs' of ACA either, but for all gov't assistance programs. No one should loose ALL their assistance for earning just $1 more than some arbitrary & absolute threshold.
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I agree. This might be something that a functioning legislature could remedy.
 
I think the people that are declaring demand-side economics dead and buried are the same people telling us in 2008 that the Fed printing so much money would lead to runaway inflation, and that budget cuts in the EU countries would improve their situation. :)

You're making a huge assumption that the same amount of raw dollars would be paid to workers. That assumes that enough additional jobs would be created to counteract the lowered pay of the existing workforce. Will a 20% drop in overall labor costs produce 25% more jobs? I doubt it. How much more fast food can people really eat? :)

Look at what is going on with corporate profits versus labor costs--

Corporate Profits Just Hit An All-Time High, Wages Just Hit An All-Time Low - Business Insider

We're seeing lower labor costs. That doesn't seem to be translating into robust job growth though. For the most part, it seems to be translating into higher profits on flat revenues, with little increased demand for labor.


samclem said:
Even if we accept the demand-side economics argument (it's definitely losing favor: the old "Henry Ford paid his workers more so they could buy his cars" claptrap is dead and buried), it doesn't apply to this case because the same amount of raw dollars is being paid to workers, it's just being paid to a larger number of them when wages are lower and more people are hired to do formerly uneconomic labor. Fans of Keynes should cheer about this, because lower income workers spend a higher portion of their wages on goods and services (higher-income workers tend to invest or save their earnings to a larger degree). By their logic, if we want to drive up demand for goods, more workers earning less is better than fewer workers earning more.
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Hamlet said:
That assumes that enough additional jobs would be created to counteract the lowered pay of the existing workforce. Will a 20% drop in overall labor costs produce 25% more jobs? I doubt it.
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I doubt it, too, obviously. All I wrote was that lower labor costs result in more jobs, and I would love to hear a reasoned argument to the contrary (or for the logical extension--that higher labor costs result in more jobs. Ain't gonna happen.)

Hamlet said:
We're seeing lower labor costs. That doesn't seem to be translating into robust job growth though.
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Lots of things affect the number of jobs in the economy, there's no reason to think lower labor costs can trump everything else. We don't know how many additional jobs we would have lost if our labor costs had been higher.
 
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That's not all you wrote. You wrote "the same amount of raw dollars is being paid to workers, it's just being paid to a larger number of them when wages are lower and more people are hired to do formerly uneconomic labor".

I was trying to show that it will almost certainly be a lower number of raw dollars, which will make the aggregate demand problem worse, not better.

samclem said:
I doubt it, too, obviously. All I wrote was that lower labor costs result in more jobs, and I would love to hear a reasoned argument to the contrary (or for the logical extension--that higher labor costs result in more jobs. Ain't gonna happen.)
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F4mandolin said:
Good one......I'm still smiling.....
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Not really that far-fetched. Have some faith. They just passed a Farm Bill that was a compromise. Both sides, plus Obama, seem to agree that ACA needs some tweaks. Smoothing the cliffs might just be something all could agree on- albeit for different reasons.
 
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