New York Times
By: Shaila Dewan
February 20, 2014
During college, Lauren Braun worked at a health clinic in Peru, where she spent an inordinate amount of time tracking down mothers in an effort to get them to bring their children in for vaccinations. The experience was frustrating, but through it Braun came up with a business plan: Make silicone bracelets that function as punch cards, to remind mothers about upcoming appointments. Back in the United States, she consulted with mentors and perfected the idea, but then, she set it aside after graduation, going to work for a large health-insurance company, taking a salary and benefits over the uncertain life of an entrepreneur.
A year and a half later, she got word that her bracelet company, Alma Sana, might have a life after all: The Bill and Melinda Gates Foundation had awarded her $100,000 to test the idea. Braun was O.K. with the 60 percent pay cut she would take by quitting her day job. But she did not want to lose her health insurance.
Were it not for Obamacare, Braun, 25, would be confronting a phenomenon that economists call "job lock": when people stay in jobs they dislike, or don't want, solely to keep their health coverage. A Harvard Business School study in 2008 estimated that 11 million workers are affected by this dilemma. Other studies show that when people don't have to worry about health insurance, they are up to 25 percent more likely to change jobs. Obamacare was designed, in part, to fix this inefficiency in the labor market, and thanks to that association, job lock has become a political lightning rod.
Deep Thoughts This Week
1. Being uninsured is very financially risky.
2. Which keeps people ''locked'' to their jobs.
3. Preventing them from becoming the next Steve Jobs.
3. Or pursuing their love of postmodern dance.
In a sense, Obamacare amounts to a massive transfer of risk. Under the old system, if you quit your job and couldn't get health insurance, you courted financial ruin every time you did something as mundane as riding your bike or playing pickup basketball. Now that risk is distributed to everyone who buys health insurance (including the government). Free of the massive financial risk of being alive, unemployed Americans can more easily take on risks associated with doing what they want to do.
Though this is a good thing for people like Braun, it doesn't look good for the labor force as a whole -- at least on the surface. In February, the Congressional Budget Office estimated that the Affordable Care Act would reduce employment by the equivalent of 2.5 million full-time jobs. Opponents seized on this as evidence that Obamacare is a job killer. But that's not what the C.B.O. meant. "The estimated reduction stems almost entirely from a net decline in the amount of labor that workers choose to supply, rather than from a net drop in businesses' demand for labor," the report says. In other words, if people work less, it will be by choice.
It may seem counterintuitive, but from an economics perspective, this is a good thing, because it encourages the labor force to allocate itself more efficiently. Older workers will finally be able to retire, leaving openings for younger workers. People will switch to jobs that better suit their talents. Parents will be able to spend more time with their families. Such changes don't always make people wealthier, but they make people happier.
"This is allowing people to not have to stay in overworked, dead-end jobs that are probably making them sicker, any longer than they need to," says John de Graaf, executive director of Take Back Your Time, an organization dedicated to reducing overwork. De Graaf says that people who work long hours with little control over their schedules are more likely to suffer ill health effects like heart disease. So increasing their choices, he says, "may save more money on health than the act itself."
The health care law does contain some perverse incentives, which might make some people less productive. Low-income workers, who stand to lose their insurance subsidies if they earn too much, might drop out of full-time jobs.
Conservative critics of Obamacare have latched onto this, and have been quick to mock the very notion that workers are "locked" to their jobs. "You're not being fired," tweeted David Burge, the conservative blogger and humorist. "You're just being freed from the job lock that keeps you from stardom in interpretive dance."
But in reality, many Republicans have long talked about the need to liberate workers from job lock, and conservative arguments against the Affordable Care Act willfully ignore the fact that giving workers more freedom benefits a favorite constituency: Would-be entrepreneurs. These future innovators might just be chained to their corporate gigs, unable to boost the economy with small-business hiring. Access to health insurance outside of work should enable them to take the leap.
James Bailey, a graduate student in economics at Temple University, came up with a clever way to test that theory: he looked at what happened to 19- to 25-year-olds when the Affordable Care Act made it possible for them to stay on their parents' health insurance plans, beginning in 2010. Those who got the coverage, he found, were two to three times more likely to go into business for themselves. And that increase was largely driven by women, who are generally more risk-averse than men.
"Women are more sensitive to the safety net in general," says Sarah Hamersma, an economist at Syracuse University. She found that when states expanded Medicaid eligibility, single mothers who had insurance through their employers were more likely to change jobs. That was true even if they did not qualify for Medicaid, suggesting that just knowing the safety net was there encouraged them to take risks. If part of what causes the wage gap between men and women is that women seek jobs with greater flexibility (and lower pay), then more self-employment might help fix that.
Still, having the government equalize risk cuts both ways. With Alma Sana's initial feasibility study complete, Lauren Braun is currently spending a few months in Germany, where the safety net is robust. Entrepreneurs there tell her they are envious of Americans. "There's a lot fewer investors here," Braun says. In part, that's because there's less wealth, fewer millionaires and fewer angel investors (or, in the case of her benefactor, the Gates Foundation, people with so much money they just give it away).
Our economy needs risk-takers in order to grow. That's why the government creates programs to mitigate risk. For example, insuring student loans softens the risk of investing in an education. The bankruptcy system lessens the risk of starting a business.
When Braun got the grant to start Alma Sana, the Gates Foundation's generosity might have been pointless had it not been possible for her to go on her parents' health plan. Without that, she says: "I would have had to have gotten a different full-time job in addition to doing this, and that would have been really challenging. I've worked 12 hours a day from the beginning of this grant period." Meanwhile, the bracelets, which cost just pennies to make, could save thousands of lives and millions of dollars in wasted vaccines -- or her startup might fail entirely. That's a gamble Braun chose to take.