Fact Check: Jacobs -- Affordable Care Act means fewer jobs, lost wages

Published: March 7 2014 | 9:59 am - Updated: 1 April 2014 | 9:16 am in Fact Check,

Introduction

"According to Congressional Budget Office figures, there are 2.5 million less jobs that'll be available and that translates into $70 billion of lost wages."

Source of claim

Mark Jacobs, a Republican candidate for U.S. Senate, in a recent YouTube video.

Analysis

Jacobs, a West Des Moines Republican and former executive with Reliant Energy, is in a crowded field vying to replace retiring Sen. Tom Harkin, a Demoract. He is calling for a repeal of the Affordable Care Act (ACA) in favor of "market-driven reforms."

Fact Checker focused on Jacobs's specific claims that about 2.5 million fewer jobs will be available and $70 billion lost wages due to the  ACA.

In February, the Congressional Budget Office, which provides nonpartisan research for Congress, released an 182-page budget and economic outlook for 2014-2024. The report included substantial analysis of the ACA.

The report projected 2.5 million fewer full-time workers in 2024 compared to what would have been without ACA. A key distinction between Jacobs's claim and what is said in the report is that CBO expects that employers will have jobs available, but the work force will choose to work less.

Because of how the ACA is designed, subsidies provided in the law are phased out as people earn more money, according to the CBO report. So the ACA is likely to incentivize some people, particularly at the lower end of the wage scale or nearing retirement, not to work, the CBO report concluded.

"The reduction in CBO's projections of hours worked represents a decline in the number of full-time-equivalent workers of about 2.0 million in 2017, rising to about 2.5 million in 2024," the report stated on page 117. "Although CBO projects that total employment (and compensation) will increase over the coming decade, that increase will be smaller than it would have been in the absence of the ACA."

But the CBO report also determined that demand for workers should be fairly strong, and in the short term this dynamic could help clear a backlog of unemployed who have struggled with a lack of job opportunities.

In addition, the CBO report projected a net decline in aggregate compensation.

"Specifically, CBO estimates that the ACA will cause a reduction of roughly 1 percent in aggregate labor compensation over the 2017–2024 period, compared with what it would have been otherwise," the report stated.

There wasn't a specific reference to a $70 billion wage loss in the report. CBO didn't calculate the financial effect on wages or cite the supporting evidence for the statement in the report. A CBO spokesperson said he had no further analysis available.

A Jacobs spokesman cited an opinion column from the Washington Post as the source of the $70 billion figure.

Mark A. Thiessen, a conservative columnist, wrote, "Since wages and salaries were about $6.85 trillion in 2012 and are expected to exceed $7 trillion in 2013 and 2014, a 1 percent reduction in compensation is going to cost American workers at least $70 billion a year in lost wages."

Thiessen's $6.85 trillion figure comes from a White House report called "Statistical Tables Relating to Income, Employment and Production," and 1 percent of $6.85 trillion is about $70 billion.

Dan Shane, a University of Iowa College of Public Health assistant professor of health policy, said it would be difficult to know for sure if the $70 billion figure is accurate because the CBO is not explicit in its statement. However, Shane said Thiessen's $70 billion figure is a reasonable "rough swag" of how 1 percent aggregate reduction would calculate, and if anything it may understate the wage loss.

Conclusion

Jacobs is misleading in suggesting 2.5 million fewer jobs will be available, and the CBO report found demand for workers will increase. But the the overall takeaway that there will be 2.5 million fewer people working is on point. Readers will have to decide if the tradeoff of getting more Americans insured is worth having fewer people in the work force.

We did question whether Jacobs' misleadingly gave the impression the $70 billion in lost wages figure came from the nonpartisan CBO report rather than a columnist. The figure is hard to pinpoint, but a scholar who researches the ACA agreed that $70 billion is a reasonable calculation based on the CBO report.

We deem Jacobs's claims as mostly true.

Sources

Mark Jacobs' claims: https://www.youtube.com/watch?v=afaFBglEEUU&list=PL4QzUEi0JE7h_H0WVeCD-ueZX_AtritKd

Congressional Budget Office report overview: http://www.cbo.gov/publication/45010

Congressional Budget Office report: http://www.cbo.gov/sites/default/files/cbofiles/attachments/45010-Outlook2014_Feb.pdf

Thiessen column in Washington Post cites $70 billion in lost wages: http://www.washingtonpost.com/opinions/marc-thiessen-obamacares-70-billion-pay-cut/2014/02/10/f4de89d6-9259-11e3-b227-12a45d109e03_story.html

White House report: http://www.whitehouse.gov/sites/default/files/docs/erp2013/ERP2013_Appendix_B.pdf


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