Wednesday, May 10, 2017

Jobs and the repeal of the Affordable Care Act

An economy equals the flow of transactions exchanging goods or services for money. Your weekly purchase of corn flakes supports production, income and employment back through the marketing chain starting with the farmer and ending with the cashier in the grocery store. The total flow of production in billions of transactions equals the Gross Domestic Production.

The million plus college students who take economics every year know the above phrasing as the circular flow of transactions, which brings a warning about the proposed repeal of the Affordable Care Act and Medicaid cuts. They threaten to eliminate billions of dollars of transactions and the production and employment that goes with it.

Make no mistake the recent Republican proposal repeals the Affordable Care Act(ACA) on top of $880 billion of estimated Medicaid cuts. The Obama version of the ACA required all insurers to offer at least one policy based on a national risk pool. A national risk pool spreads risk of illness and injury to everyone and assures no one can be excluded based on any definition of a preexisting condition. The Republican repeal eliminates the national risk pool and eliminates the controls on insurance charges that must go with it. It makes no difference if insurers must offer a policy to those with a preexisting condition if they can in turn charge whatever they want; they just price people out of insurance.

Charges for insurance were controlled under Obama Affordable Care, which the Republican repeal eliminates. Subsidies for the working poor based on income were funded with dedicated taxes, which the Republican repeal eliminates. Instead the Republican repeal offers a federal tax credit that will be useless without controls on charges. The $2,000 will become the minimum charge on the way up to whatever the traffic will bear, and the working poor do not have enough income to use a $2,000 of tax credit anyway.

If we assume the middle class can pay higher premiums for health insurance more dollars going to health care redirects spending and employment away from spending on consumer goods or from industries like leisure and hospitality. However, cuts in Medicaid, a service the working poor cannot afford, eliminate billions in transactions and the employment that goes with it.

Health care employment that includes ambulatory care, hospital care, nursing and residential care facilities, and social assistance services has just over 19 million jobs in the U.S. economy. Since 1990 health care generated 28 percent of new jobs or 9.72 million new jobs out of a total of 34.7 million new jobs. Last year in 2016 health care added 498 new jobs, more than any other industry sector or sub sector.

Leisure and hospitality – arts, entertainment, recreation including gambling, accommodations, food services and restaurants – was second for new jobs with 459 thousand more jobs, except the Trump administration has attacked foreign nationals and threatened foreign travel and tourism dimming the prospects for job growth here. Many of these jobs pay low wages anyway.

A third sector for new jobs came in professional and technical services that added 268.3 thousand new jobs, but well over half of them came in just two sub sectors: computer design and related services and management and technical consulting services. Administrative and support services added 200.3 thousand jobs in addition but over half of these jobs came in temporary help services, and services to buildings, especially landscaping.

A fourth sub sector for job growth was government services that added 194.1 thousand jobs, but almost all of them came at the local government level, much of it in primary and secondary public schools and Republicans attack government everyday.

The four sub sectors listed above accounted for two thirds of America’s new jobs last year with health care and leisure and hospitality by far the biggest gainers. The combined new jobs last year from all jobs in goods production – natural resources, construction, manufacturing - wholesale and retail trade, information services including Internet services, financial services including real estate and rental services, and personal services did not equal new jobs in health care alone. Given the prospects for job growth are limited to two industries and two professional sub sectors it does not appear smart to attack health care employment. That assumes Trump does not want a recession, which could be wrong.