I’ve got some original-ish research to report on.
Among the many controversial aspects of expanding medicaid to more Americans, there are debates on whether medicaid:
- Is low quality care that ends up making its recipients worse off
- Causes a decrease in the labor supply since some workers on the margin will be less inclined to find work if they already have health insurance
- Causes significant increases in certain healthcare utilization like emergency room visits that cause a strain on the system
- Causes an increase in happiness merely by reducing the financial stress of being uninsured
It can be tough to totally figure out the magnitude of these effects since comparing a population that has medicaid and a population that doesn’t can’t account for unobserved characteristics that will almost certainly bias estimates. But luckily, we have a social scientist’s dream.
Oregon had decreased its medicaid rolls due to budget cuts and then in 2008 realized they had funding for 10,000 extra spots. Knowing they’d have more interest than availability, they left these spots up to a random lottery that ended up having ~90,000 applicants. Since the chosen households would be picked at random, it’d be possible to compare the population of those who were selected by the lottery to those who didn’t and evaluate their outcomes.
The NBER has already done a lot of good research on this. Their initial findings suggest that after being on Medicaid in Oregon’s Oregon Health Plan for 12 months increases medical utilization (for better or worse), decreases financial strain, and increases self-reported measures of happiness. One significant finding: “…if we compare our estimates to the literature on the impact of income on happiness, the impact of insurance is roughly equivalent to the impact of a doubling of income.”
But what about the effect on labor supply? The CBO and Casey Mulligan have suggested Obamacare will significantly reduce the number of workers in the labor force. Obamacare covers the entire country and the OHP only covers a subset of the Oregon population, so this is not an entirely apples to apples comparison. Nonetheless, I can say from doing initial estimates using the data from the OHP study that, controlling for a variety of individual and household characteristics, being on OHP because of the lottery has no significant effect on employment compared to those who were in the lottery and were not selected.
There has been some work getting to this conclusion, but I haven’t found any that goes as in depth as I have looked. For example, one theory is that this expansion could cause older people to exit the labor force since the only thing keeping them in a job until they’re medicare-eligible is the presence of healthcare. I have so far found that separating on quantiles of age does not produce significantly different results. The same can be said of dividing up the data into quantiles based on household income – the idea that people approaching the income threshold for medicaid will stop working to continue staying on government assistance has also been so far refuted.
The findings still need to be reviewed, but I think it’s a notable find.
Upset Patterns 
November 12, 2014 at 5:15 pm
I’m confused why reducing the number of workers in the labor force is a bad thing? These people are still existing, and thus contributing to the economy, but they aren’t using up jobs. A smaller labor force should make it easier for those that want jobs to get them. And as has been argued quite a bit elsewhere on this site (https://upsetpatterns.wordpress.com/2014/08/07/aparkalypse-now-2/#comment-1826 and https://upsetpatterns.wordpress.com/2013/12/05/should-we-raise-the-minimum-wage/#comments and many other conversations), seems like people don’t like it when people that want jobs can’t get them.
November 12, 2014 at 5:28 pm
A smaller labor force means less produced which means less demand for labor and so lower wages and open positions. The people are existing, but not contributing to the economy. Think of a country where a relatively high portion of people are over 65 and retired, like Japan. Having a huge proportion of people outside the labor force does not mean everyone in the labor force is better off. It’s important not to ignore the general equilibrium effects of having fewer people in the labor force.
The number of jobs is not fixed (so jobs aren’t “used up”). It might be more visible which jobs are “taken” by immigrants but what is less visible is the jobs they create by increased output.
A more obvious example might be a time period in American history where people typically not in the labor force were suddenly thrown into it. Unemployment didn’t skyrocket, wages didn’t tank. What I’m talking about of course is after WW2 when women started to enter the workforce in dramatic rates. We’re better off because of it, and they didn’t “use up” jobs that were taken by men in a zero-sum game. Whichever jobs they might have directly replaced men in, they created other jobs elsewhere by higher output and higher demand.
November 12, 2014 at 6:19 pm
Wait, what?! This seems completely inconsistent with statements you’ve made in our discussions about minimum wage.
You say, if we raise the minimum wage, people will lose jobs. This implies that in the market as a whole, employers are willing to spend X amount on labor. If labor costs y then you get Z employed people. But if you then raise, Y, you get a smaller z number of employed people.
You just said, “The number of jobs is not fixed (so jobs aren’t “used up”).” But you have been arguing for quite some time that the amount people are willing to pay for labor is fixed.
I acknowledge that the and the are not the same thing but it seems to me like your stance on the fluidity of jobs seems to change depending on what point your trying to make.
Here is a specific example, you said on this page: [https://upsetpatterns.wordpress.com/2013/12/05/should-we-raise-the-minimum-wage/#comment-1957]
“Judging from this incomplete correspondence, this is what I’ve gathered: We both agree that mandating a living wage would come at the cost of some displaced workers. You believe that these displaced workers would find new jobs because the market is self-correcting. I do not, because I believe the only way displaced workers get shifted to new jobs is through exogenous technological change (Or, let’s say the workers at a VHS factory lose their jobs and now get employed at a DVD factory – this is just an analogy). I don’t think making labor more expensive in one place makes new demand pop up anywhere. I also do not believe that the market can always self-correct unemployed workers (like the last five years of this current recession).”
But then just now in your last comment you said:
“A more obvious example might be a time period in American history where people typically not in the labor force were suddenly thrown into it. Unemployment didn’t skyrocket, wages didn’t tank. What I’m talking about of course is after WW2 when women started to enter the workforce in dramatic rates. We’re better off because of it, and they didn’t “use up” jobs that were taken by men in a zero-sum game. Whichever jobs they might have directly replaced men in, they created other jobs elsewhere by higher output and higher demand.”
Well, what is it? Can we create new jobs elsewhere by higher output and higher demand, or is the only way to create new jobs through exogenous technological change?
November 12, 2014 at 6:29 pm
These are totally different. An increase in the labor force increases new output. New output increases the demand for new labor to produce that output. We create jobs by higher output and/or through exogenous technological change. Technological change leads to more output which leads to higher demand for labor. Increasing a minimum wage does neither.
I think you need to stop getting hung up on the minimum wage example because we’re just talking past each other at this point.
November 12, 2014 at 5:28 pm
(I realize that you aren’t saying it is a bad thing. It sounds to me like The CBO and Casey Mulligan think it is though. So why isn’t the answer, “who cares.”)
November 12, 2014 at 5:33 pm
(you posted your comment right when I was writing this, so you can ignore this comment! 😃)