Monday, August 25, 2014

ACA Survey from the Philadelphia Fed

Here is a survey from the Philadelphia Fed with some interesting answers regarding the ACA (HT: Patrick Sullivan).  You can click on the links for details.  The gist of it is that the manufacturers reported that, as a result of the ACA, they have decreased the number of full time workers, increased the number of part time workers, raised prices on their products, raised contributions, premiums, and deductibles on their employee health plans, and reduced coverage.

First, a caveat.  It seems to me that the jury is still out regarding part time employment.  There is a lot of anecdotal and survey evidence of this effect, but I don't see strong evidence of it in the data.  Now, it could be that there are a number of supply and demand factors at work in the part time employment realm.  I think that as the economy recovers, the binding constraint on the total level of part time workers will be the supply of part time workers.  In the meantime, I don't see any obviously odd movements in part time employment.  I'm not sure how to square this with employers reporting that they are transitioning to part time work.  There is a lot going on there down in the weeds.

Here is the graph of part time workers, as a proportion of the labor force.  The sharp rise in part time workers for economic reasons clearly happened during the recession, pre-ACA.  Possibly the recovery could have been sharper.  But, I don't see any smoking gun here, regarding an ACA-related jump in part time employment.

The average weekly hours worked from the monthly establishment survey also doesn't seem out of line compared to long term trends.


from the BLS
This all is a reminder of the difficulty of accounting for the costs of these sorts of things.  There have been a few policies that I have harped on, such as minimum wage hikes and Extended Unemployment Insurance, with specific claims about how they harmed workers.  But, in those cases, the policies had a very pointed and direct effect on some specifically identifiable people, so we can identify some sharp empirical evidence about their effects.

But, with so many regulations, like the ACA, the effects are tough to suss out.  Any effects there might be probably just slightly bend the curve of growth of human quality of life, and the damage comes in the long term.

Most of the changes the employers point out probably are accounted for as increases in nominal GDP.  There is a lot of economic activity engaged in compliance activities.  And, for regulations like this, it comes down to how the hedonic changes in price levels are accounted for.  When you lose access to your family doctor, does the BLS account for this as a decrease in quality?  Frankly, in an industry so screwed up, I don't understand how they can begin to account for economic activity.  What is the market price for a medical procedure that is "billed" at $2,500, but settled with your insurance company for $200, with a $20 co-pay?

It seems to me that much of the added costs of the ACA, the results of this survey being good examples, will play out as inflationary.  But, on the other hand, something like secondary education isn't accounted for at all in inflation measures.  That kind of government expenditure is simply recorded as real economic activity.  (Please correct me in the comments if I'm wrong.)

So, while GDP is useful for much analysis, with government expenditures at nearly half of GDP and a growing number of mandates, it ceases to be a good measure of absolute quality of life.  Some measure of the quality of public services and mandates would be required.  I'm not aware of any measure that can remotely address that.  A problem with programs like ACA is that they muddy the usefulness of indicators like GDP.  I'm not sure they even effect growth rates coherently, except in the very long term.  Government programs certainly have a knack for growing, which will usually show up as real growth in the GDP.  The same goes for mandate-based rent-seeking.  The production of ethanol, which probably put millions of acres of US farmland to use with no net positive economic benefit, added $44 billion to GDP in 2013.  (And created nearly 400,000 jobs!)

In 2012, total US government expenditures (including transfers) amounted to $47,159 per household.  The median household US income in 2012 was $51,017.  The median US household is left with $3,000 to spend on government mandates and all private personal consumption (housing, food, transportation, etc.)  To the extent that the median household engages in any private consumption at all, it is because our progressive tax code has essentially transferred those resources from high income households to median income households.  What is the value of that $47,159 of expenditures?  Could it possibly be anywhere near the amount spent?  Does it really take essentially all of the labor of the median US household just to support public services?  How can essential public services (not including off-budget mandates) require more expense, per capita, in real dollars, than the entire pre-1960 US economy?  Some people argue that we should return to 1950's tax rates.  If it is the essential services and social support of the 1950's that they want, shouldn't they argue for a return to 1950's public budgets?

4 comments:

  1. Interesting that education does not come out inflationary in the sense of healthcare, because it is so much easier to account for. When a student enters into the relationship, there's a fairly good understanding all around, what the student may actually be able to contribute, versus what someone else contributes. Whereas, no such certainty exists in the healthcare relationship. Healthcare outcomes are uncertain, insurance claims are uncertain, hospital "monies left over" in given quarters for ongoing needs, are uncertain. All of which mean more exogenous support needed for healthcare expenses which comes from "God knows where".

    ReplyDelete
    Replies
    1. That's a good point. And it shows how much we have mismanaged education that it has been so inflationary, such as in college expenses, though, again, I'm not sure how that plays out statistically.

      Delete
  2. Good post. This is definitely a point to keep in mind:
    "So, while GDP is useful for much analysis, with government expenditures at nearly half of GDP and a growing number of mandates, it ceases to be a good measure of absolute quality of life."

    ReplyDelete