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Obamacare's Impact On Employment: An Early Look

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Before the Affordable Care Act went into effect last year, critics claimed it would lead to job losses and cuts in employee hours. But how is it really playing out?

The dire predictions have so far proved to be unfounded, according to a new research paper from Federal Reserve Bank of New York economist Maxim Pinkovskiy. The fear was that employers who were newly required to provide health insurance to their workers would opt instead to cut hours or fire employees. But early numbers show that locations with a high percentage of uninsured Americans, such as Texas, ended up experiencing a rise in employment, salaries and output in comparison to areas with less exposure to the health care law, Pinkovskiy noted.

Part of Obamacare's mandate was the requirement that employers with more than 50 full-time workers would need to supply them with medical insurance. Anecdotes about companies such as Subway and Carl's Jr. turning to part-time workers to avoid the mandate raised concerns that the law would derail America's already shaky recovery. That was despite the nonpartisan Congressional Budget Office saying there was "no compelling evidence" that part-time work was on the rise because of the law.

Part-time work in states where Obamacare had major impact saw "a statistically insignificant decline in their part-time to full-time ratio," Pinkovskiy wrote. "Hence, it appears very unlikely that the ACA substantially reduced employment in the areas that could expect to be most affected by it."

The bottom line is that in the first year of implementation, "it is unlikely the ACA had adverse labor market impacts," he wrote. "It did not substantially impede the recovery after the Great Recession."

What about the ACA's anticipated benefits, such as freeing Americans from so-called "job lock"? That's when workers who depend on their employers for health insurance are unwilling to leave because of the fear they won't be able to find insurance elsewhere.

Because the ACA created insurance marketplaces and barred insurers from excluding coverage for Americans with chronic health conditions, some economists forecast that the law would significantly reduce job lock. Presumably, newly free workers would have the flexibility to start their own businesses or pursue work in different industries.

That appears to be happening, according to research finding an increase in workers in industries that don't typically offer health insurance, such as the retail or hospitality industries. Of course, the downside is that these types of jobs are often poorly paid and offer paltry benefits, so that may not be something to cheer about.

It could also reflect the fact that many new jobs in the uneven economic recovery are in these industries, and chronically unemployed workers -- who are now able to buy insurance through Obamacare's health exchanges or through the law's Medicaid expansion -- are shifting into these roles as a way to get their footing.

As in anything in life, all this research comes with a big caveat: Obamacare is still in its infancy, and major sections of the law still haven't come into effect, such as the so-called Cadillac tax. Another potential issue is how the labor market will react if health care costs keep growing faster than the economy, as it has in past years.

"While it is heartening that the ACA does not appear to have substantially slowed the recovery or hurt it in its first year of implementation," Pinkovskiy's paper noted, "its long-run impact on the U.S. economy remains to be seen."

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