Tuesday, February 11, 2014

The ACA and wages

The ACA reduces hourly employer cost in at least 3 ways:

(1) employer penalty. I doubt the national accountants will count this as employee comp, so it will lower measured employer cost even if it raises marg prod of labor
(2) productivity. the aca changes the allocation of factors to sectors and the allocation of spending to sectors. my best estimate is that it lowers productivity one percent
(3) for large segments of the population, quasi-fixed costs of employment are amortized over fewer hours. ie, part-time jobs pay less per hour than full-time jobs do.

Trevor and I have a paper with two of these effects. "wedges, wages and productivity under the ACA"

A paper with the third is almost ready for NBER wp. Trevor also looks at the productivity losses from inducing employers to keep FT employment below 50.

Far more important than any of this is what the ACA does to AFTER-TAX wages: sends them to zero in too many cases. I'd like to see the empirical labor economists try to take the log of that!


johns said...

I enjoy your work very much. I am wondering, do you favor making the EITC into a true marginal wage subsidy/negative income tax along with a reduction or elimination of the min wage? This would be a superior social policy because 80% of the beneficiaries of min wage increases are not poor.

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