Predictions of the Impact of the Affordable Care Act on the Labor Market

1. Wedges, Labor Market Behavior, and Health Insurance Coverage with Trevor S. Gallen. The Affordable Care Act’s taxes, subsidies, and regulations significantly alter terms of trade in both goods and factor markets. We use a multi-sector (intra-national) trade model to predict and quantify consequences of the Affordable Care Act for the incidence of health insurance coverage and patterns of labor usage. If and when the new exchange plans are competitive with employer-sponsored insurance (ESI), our model suggests that more than 20 million people will leave ESI as a consequence of the law. Behavioral changes that are captured in the model could add about 3 million participants to the new exchange plans: beyond those that would participate solely as the result of employer decisions to stop offering coverage and beyond those who would have been uninsured. Industries and regions will grow, decline, and change coverage on the basis of their relative demand for skilled labor.
2. Wedges, Wages, and Productivity with Trevor S. Gallen. Our paper documents the large labor market wedges created by taxes, subsidies, and regulations included in the Affordable Care Act. The law changes terms of trade in both goods and factor markets for firms offering health insurance coverage. We use a multi-sector (intra-national) trade model to predict and quantify consequences of the Affordable Care Act for the patterns of output, labor usage, and employee compensation. We find that the law will significantly redistribute from high-wage workers to low-wage workers and to non-workers, reduce total factor productivity about one percent, reduce per-capita labor hours about three percent (especially among low-skill workers), reduce output per capita about two percent, and reduce employment less for sectors that ultimately pay employer penalties.
3. It looks like the start of ACA subsidies coincides with the expiration of Emergency Unemployment benefits. That coincidence should not be confused with impact (use your mouse to slide the chart or click here to see full screen).