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Home Publications Blogs Beat the Press The WSJ Wants to Blame Obamacare for Weak Hiring, but It's Not Quite Sure Why

The WSJ Wants to Blame Obamacare for Weak Hiring, but It's Not Quite Sure Why

Saturday, 08 February 2014 06:01

The Wall Street Journal reported on the weak January jobs number. It's sure that Obamacare is somehow responsible, it just can't quite get a clear story together.

The article begins:

"A hiring chill hit the U.S. labor market for the second straight month in January, reflecting employers' reluctance to take on new workers despite some of the nation's strongest economic growth in years."

So the story is that the economy is growing rapidly, but firms for some reasons are not hiring workers. We get that more explicitly a couple of paragraphs down.

"The report left several puzzles unanswered, including the dichotomy of solid growth and weak hiring. Throughout the recovery, businesses have been able to boost production at a faster pace than employment. That trend could also be supporting GDP growth despite the hiring slowdown."

So businesses have been scared away from hiring and are instead increasing productivity. So let's look at that soaring productivity growth.


                                               Source: Bureau of Labor Statistics.

Yeah, well not quite. Productivity growth has been 1.7 percent over the last year. That's well below the 2.8 percent average in the decade before the downturn and spectre of Obamacare haunted the business world.

If productivity growth doesn't explain the lack of hiring maybe firms are increasing hours to avoid having to commit themselves to hiring new workers. That one won't help either. The average weekly workweek was 34.4 hours in January, that's above the lows hit in 2009 and 2010, but still below the 34.5-34.6 range we saw in 2007. And the average workweek actually has fallen since November. So the WSJ wants to tell us that firms are seeing increased demand for labor and aren't meeting it through hiring, but apparently also are not meeting it through productivity growth or increased hours: very interesting.

After giving us a bit more information about the new jobs numbers the article returns to Obamacare:

"The health-care sector added just 1,500 jobs in January after a gain of 1,100 jobs in December. The sector had supplied a steady stream of jobs for years, raising more questions about whether the rollout of the Affordable Care Act last fall is restraining hiring.

"The health law has curbed hiring at Pita Pit USA Inc.'s 220 sandwich shops, said Peter Riggs, a vice president at the Coeur d'Alene, Idaho, firm. 'We're not quite sure what the unintended consequences of the Affordable Care Act will be,' he said. 'We have an ongoing commitment to the people we've already hired, but we're more wary than in the past about hiring too many new people.'"

This is more than a bit bizarre. One of the goals of Obamacare is to restrain cost growth in health care. This will likely mean restraining employment growth in the health care sector. That is a point of the Affordable Care Act (ACA), not an unfortunate consequence.

On the other hand there is a totally separate question as to whether the ACA would reduce hiring in other sectors. The WSJ again tells us it has found a business person who claims this is the case, but the data do not support the claim that this is a more general problem.

Anyhow, everyone should know that the WSJ is working hard to convince us that Obamacare is really bad for job growth. One day they may have some evidence to support this view. Btw, this is a news article.

Note: Typo fixed -- thanks Jennifer.


Comments (8)Add Comment
typo and font error
written by Jennifer, February 08, 2014 8:02
"So businesses have been scared aware"-should be scared away, right?

also you have the same font from the WSJ quote on, it's a little confusing.
Too Many
written by Last Mover, February 08, 2014 10:38
'We have an ongoing commitment to the people we've already hired, but we're more wary than in the past about hiring too many new people.'"

Taken literally this could mean too many were hired in the past which explains why not many are hired now.

Other reasons could be robots, uncertainty, the ACA or whatever speculation one prefers given the open ended way the WSJ frames the trumped up "hiring slump" of 220 sandwich shops contrasted to "strong economic growth".

Maybe, just maybe, they're wary about hiring "too many people" because sales are down. The least the WSJ could have asked, given the anectodal evidence used, as Dean Baker points out, is:

Does not hiring "too many new people" now, mean current employees are working more to meet demand supposedly there, concurrent with "strong economic growth? If not, are you effectively admitting not enough demand exist to justify adding more employees?

Or if demand does exist, are you seriously suggesting the ACA cuts into profit margins enough to forego those sales?
Liberal Economist Predicts Obamacare Kills Jobs
written by Robert Salzberg, February 08, 2014 11:04
Dr. Dean Baker wrote:

"One of the goals of Obamacare is to restrain cost growth in health care. This will likely mean restraining employment growth in the health care sector. That is a point of the Affordable Care Act (ACA), not an unfortunate consequence."

In general, if you reduce the price for a product, you increase demand. (Think computers and smart phones.) Health care is very much a hands on, labor focused industry that would increase employment with increased demand due to lower individual prices. While lower prices decrease profit margins and suppress wage growth, the specific cost controls in the ACA do little to suppress the demand for health care employment.

The cost controls built into the ACA mostly come from things like reduced over-payments to Medicare replacement plans, medical loss ratios for insurance companies, and reduced payments to hospitals for uncompensated care. None of these mechanisms are likely to have a measurable negative effect on health care employment.

Reducing patent protection for drugs and/or opening up more competition from foreign trained physicians are a couple of the ways Dr. Baker has suggested to control health care price inflation, but neither of those was included in the ACA and even if they were, it's hard to see how they would reduce utilization and therefore lower health care employment.

Of course, if death panels and rationing were the methods of cost control in the ACA it would reduce health care employment...
written by labman57, February 08, 2014 11:59
Yet another example of a conclusion desperately in search of a rationalization.
ol' factory problem?
written by Squeezed Turnip, February 08, 2014 3:11
WSJ has to go looking at sandwich factories for a corroborating story? Now, that's news. Next thing ya know, they'll blame heart attacks on acid reflux. Ain't modern journalism something?
Job Killers in Obamacare Were Killed Long Ago
written by Robert Salzberg, February 08, 2014 4:24
If you reduce health care utilization, you'll reduce demand for services and reduce jobs. The components of the ACA that target reducing utilization like the Medicare Payment Advisory Board, funding for comparative effectiveness research, and funding for pilot programs that move towards paying for quality rather than quality were largely defanged and defunded with only skeleton changes making it into the ACA.

Another solution to over-utilization was stricter restrictions on physician owned ancillary services, but that was stripped out in committee.

Perhaps the most successful program in the ACA to reduce utilization and therefore reduce health care jobs is the penalties for readmissions for Medicare patients with diagnosis like congestive heart failure. But the minor downward pressures on over-utilization built into the ACA are swamped by the millions of Americans added to the insurance roles by the ACA.

If the ACA manages to significantly control health care costs, the relative increase in comparative advantage should increase exports, lower the trade deficit and create more jobs.
written by Larry Signor, February 08, 2014 7:23
The predominant reason healthcare is not adding jobs is not because the ACA is eliminating them, but because there are 20 states that rejected Medicaid expansion and health market places. This political decision will skew any type of microanalyses.
written by kharris, February 10, 2014 7:30
The WSJ piece seems to be focused on the past quarter or so. Measured productivity growth in the second half of last year was the fastest for any 2-quarter period since Q4-2009/Q1-2010. In that sense, the Journal is right. Problem is, saying "productivity" is just short-hand for saying the difference between output growth and growth in hours worked. It doesn't explain anything. The author already made the point that GDP growth picked up while hiring slowed down. "Productivity" is redundant. Writing as if "productivity" explains something is a sign that the writer doesn't know the subject.

And yeah, the best productivity gain in 3 1/2 years turns out to be pretty weak - no better than average for the early 2000s.

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About Beat the Press

Dean Baker is co-director of the Center for Economic and Policy Research in Washington, D.C. He is the author of several books, his latest being The End of Loser Liberalism: Making Markets Progressive. Read more about Dean.