Tuesday, February 18, 2014

Who Cares if People Work Less?

In a post Tim wrote partly as a reply to my piece on the Congressional Budget Office’s (CBO) recent revelation that Obamacare will drive Americans to work less, he asks why we should care.

While acknowledging that Obamacare will cause workers to “withdraw their labor,” Tim maintains that these workers “will also take home a proportionally smaller share of the economic pie because they will be earning less. So the question is, why do you care how much other people work?”

If people were freely making choices, conservatives would not object. After all, Milton Friedman taught that free people make the best choices for themselves given the incentives they face in the private marketplace.

What conservatives decry, however, is, as Friedman warned, those in positions of power misaligning incentives, which yield choices that undermine both individual and societal well-being.

In this case, government incentivizes economic stagnation. And disguising it with language—that people are freely choosing to retire in order to “spend time with their families,” for instance—does not change that fact. 


  1. LOVE this. Fantastic post.

  2. David,

    You say that the Affordable Care Act amounts to "misaligning incentives, which yield choices that undermine individual and societal well-being." But this seems to assume that the health insurance market was without adverse incentives to begin with. That's obviously not true.

    Tim's point is to say that one of those adverse incentives is to accept a job with a company simply because it offers health insurance (Tim calls this job lock). But now that Obamacare offers people the ability to purchase subsidized insurance on the individual market, (which was previously too expensive) that adverse incentive is eliminated. You say that's bad because it distorts people's freedom to make the best choices for themselves, but it seems to me to be a net improvement in freedom of choice over the system we had before.

  3. Hi John,

    The point I raised does not assume anything about health insurance markets; it is merely an observation of human nature: When working more earns less (as it would for people on the lower end of the pay scale, who would lose "free" health insurance if their income went up), it encourages economic stagnation.

    Further, I agree the health insurance market reeks of adverse incentives. But the proper thing would be to repeal or reform them (such as employer-provided insurance, for instance), which would expand choice as you and I desire, without creating yet another perverse incentive, as Obamacare does here.