Perverse Incentives

Here at The Fog of Law, there’s been a lot of commentary about how ObamaCare creates incentives for employers to drop health insurance entirely, to turn full-time employees into part-time employees, or to cut the hours of part-time employees.  The newest perverse incentive comes courtesy of the CBO: the PPACA will cut the employment force by 0.5% in the next eight years.

The report, published in August, said, “The Congressional Budget Office estimates that the legislation, on net, will reduce the amount of labor used in the economy by a small amount—roughly half a percent—primarily by reducing the amount of labor that workers choose to supply … That net effect reflects changes in incentives in the labor market that operate in both directions: Some provisions of the legislation will discourage people from working more hours or entering the workforce, and other provisions will encourage them to work more.”

Some people only get out of bed in the morning and go to work so that they don’t die of starvation, exposure, or cancer.  Tell them that nothing bad will ever happen to them, no matter how lazy they are, and they will take you up on the offer.

I’m not advocating that we starve people to death, but we should understand that a non-zero percentage of the population only works for the same reason that cavemen chased wooly mammoths or soldiers in battle shoot back: to not die.  In fact, most of human history is about people getting out of bed (or the cave, or the mud hut) in the morning and doing semi-unpleasant things to stay alive.  Those could be to walk five miles each way for water, to hunt food, or to work in an office.  That our livelihoods are now more comfortable does not make them less necessary.

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Filed under Economics, ObamaCare

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