Tuesday, February 11, 2014

When Unemployment is Celebrated

In light of recent news that Obamacare discourages employment, the left has applauded the notion that working less is a good thing. But why should we celebrate forced unemployment?

Work disincentives have, until now, been universally recognized as negative for both individuals and society. Liberals, for instance, have agreed that unemployment benefits and food stamps may discourage work to some degree, but have maintained that, on the whole, the benefits simply outweigh the costs. 

But now that the Congressional Budget Office (CBO)—the economic institution whose credibility stands second to none among the intelligentsia—demonstrates Obamacare will reduce work hours, the left has abandoned the idea that less work is bad. Liberals instead reason that, if subsidizing insurance causes workers to voluntarily quit their jobs, this is a positive development. 

Most Americans reject this argument outright, and see that incentivizing someone to remain poor so as to keep health benefits is poisonous to the individual human spirit as well as society as a whole, as economic productivity will fall. 

What is less known, however, is that part of the reduction in employment, according to the CBO, will result from wage cuts, which are not voluntary. Why will employers slash wages?

Businesses with 50 or more employees will face a penalty if they fail to offer insurance. CBO delineates that the penalty will be passed along to: 
workers in the form of reductions in wages or other compensation— just as the costs of a payroll tax levied on employers will generally be passed along to employees. Because the supply of labor is responsive to changes in compensation, the employer penalty will ultimately induce some workers to supply less labor.
Funny that, in reveling over the news that Americans will work less, the left never mentioned that some Americans will be forced to leave the labor force due to pay cuts. Perhaps it’s irrelevant, because, as New York Times columnist Paul Krugman confesses, “even if CBO is completely right about labor supply, we’re really talking about a very small economic cost here for a huge social benefit…” The ends justify the means. 

That is a difference between left and right.

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