California Job Losses From Obamacare Repeal? Fear Not!

Obamacare was a cash cow for providers, which now argue it was a program for jobs and economic growth. They now say that repealing Obamacare will kill California jobs. That grabs any politician’s attention, but it is not true.

According to a study by the UC Berkeley Labor Center, which is promoted by the California Hospital Association, “The majority (135,000) of these lost jobs would be in the health care industry, including at hospitals, doctor offices, labs, outpatient and ambulatory care centers, nursing homes, dentist offices, other health care settings and insurers.

“But jobs would also be lost in other industries. Suppliers of the health care industry, such as food service, janitorial and accounting firms, would experience reduced demand, leading to job loss. The lost jobs also include those lost due to the ‘induced effect’ of health care workers spending less at restaurants, retail stores and other local businesses.”

Such research relies on the so-called “multiplier effect,” a politically seductive but misleading type of voodoo economics. It goes like this: Obamacare throws money at hospitals, doctors’ offices and other health services. Those recipients build new facilities and hire more workers, who spend their paychecks in their communities.

Okay, but if Congress just sent a fleet of helicopters to scatter banknotes from the sky, the same “multiplier effect” would take place: People would pick the money up and spend it. Businesses located near the drop zones would profit, hire and expand. However, jobs and the economy would not grow because the effect would be a mix of inflation and reduced spending in areas away from the drop zones.

Worse, because this type of spending is politically motivated, it is usually demanded by industries which resist productivity improvements. Last July, Dr. Bob Kocher, a venture capitalist who served as a special assistant to President Obama when Obamacare was crafted, lamented that just over half of health services workers are administrators, up from just over one third before Obamacare.

Indeed, the evidence suggests Obamacare has had the perverse effect of driving too many workers into health services, depriving other, more productive sectors of labor.

During Obamacare’s “incubation” until December 2013 (before Covered California’s insurance policies became effective and Medi-Cal expanded), health services jobs increased by 2.5 percent annually while non-health jobs increased by 2.0 percent annually. From the start of Obamacare coverage through last December, health services jobs grew by 3.4 percent annually, while non-health jobs grew by 2.6 percent annually.

The change in composition of employment in California during this period, just short of a decade, is astonishing.

At the end of July 2007, health and social services employed 1,692,000 people and added 517,000 jobs by the end of last year, never having suffered a recession. Just 587,000 nonfarm civilian jobs outside health and social services jobs were added during that same period. Health and social services jobs grew over 30 percent while other jobs grew by less than 5 percent over 113 months! Although comprising just 11 percent of jobs in California in July 2007, health and social services accounted for almost half the job growth since then.

This is the result of a politically driven reallocation of resources toward health services spending that is still characterized by waste and inefficiency. Obamacare has proven a poor deal for patients. It is also a poor deal for jobs and economic growth in California. It has to stop before more workers’ valuable labor is consumed pushing paper in the government-health care complex.

Nothing contained in this blog is to be construed as necessarily reflecting the views of the Pacific Research Institute or as an attempt to thwart or aid the passage of any legislation.

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