Click to Print

How Both Parties Were Wrong About Obamacare and Jobs

February 7, 2014
URL: http://www.entrepreneur.com/article/231342

Obamacare is making itself known in the jobs report -- not by what is seen, but what is invisible and unexpected.

On Friday, the Labor Department released yet another anemic jobs report, with the economy adding just 113,000 new positions in January. Also, the stunningly low December reading of 74,000 was revised higher by just 1,000, while economists had expected a much higher revision.

In some ways, it is the same old theme: Businesses are hesitant to add jobs at a rapid rate, and potential workers are hesitant to come back into the workforce in a big way.

Related: Why Our Job Market Is Dying Before Our Eyes

But we are starting to get a clearer picture of the impact on employment from the Affordable Care Act -- just not in the way either Democrats or Republicans expected. If anything, the key talking points were myths on both sides, and that's not good for the economy.

First, the Democratic argument. When Obamacare was still up for debate, it was sold to the country as something that would create jobs. Nancy Pelosi herself predicted 4 million jobs would be created, mostly in the health-care field. We now know, courtesy of the nonpartisan Congressional Budget Office, that there is likely to be a net job destruction because of Obamacare.

What is interesting, though, is that many still thought the health-care industry would be the beneficiary of at least some job creation, even if employment didn't pick up in other areas of the economy. The opposite is true. Employment in education and health services fell by 6,000 in January. That was the largest drop for the sector since September 2004. What's more, 2013 wasn't great for health-care jobs either. In fact, the Labor Department says growth in health-care jobs came in last year at the slowest pace since 1999.

Related: As More Workers Drop Out, We Need a Better Solution

So we can stop pretending that Obamacare is creating jobs, even for the one sector that should have been a slam dunk.

Now for the Republican myth. Because of the requirements for health-care coverage, Obamacare opponents have consistently argued that companies will cut back on full-time workers and switch to part-timers. So far, that hasn't happened either. Since the beginning of the economic slowdown back in 2007, the economy has lost 4.2 million full-time jobs. More recently, though, full-time employment has inched back. In the past 12 months, there have been 1.8 million full-time jobs added -- way too low to signal recovery, but at least they are jobs. Over the same period, there have been just 8,000 part-time jobs created, according to the Labor Department.

So companies are not switching to part-timers. They are not hiring at all, even on a part-time basis. Instead, businesses are boosting productivity and doing more with less. Obamacare isn't having the effect on hiring Republicans feared. The reality is scarier.

The administration still believes that Obamacare will create jobs. Under its scenario, people who don't have to pay as much for health care will spend more, and that spending needs to be supported by companies hiring more to keep up with demand. That could turn out to be true, but we first need people to spend less on health insurance (premiums are going up, not down) and Americans have to hold jobs (job creation is not keeping pace with population growth, and actually slowing from last year). 

For now, the idea of Obamacare creating jobs or moving people to part-time status is a myth. Turns out (just like we were promised about our doctors), if you like your job, you can keep it. But don't expect Obamacare to create one for you. 

Related: How Much Blame to the Jobless Bear for Joblessness?