When the Bureau of Labor Statistics releases the unemployment
number for the month of August this Friday, even an improvement in
last month’s 7.4 percent seasonally adjusted rate will leave the
number higher than it was during any month of the George W. Bush
presidency.

And it’s not just the unemployment number that is grim. That
number, after all, gets better when job-seekers get so discouraged
that they stop looking for work. The labor force participation
rate, which measures the percentage of Americans older than age 16
who are in the work force, is the lowest it has been since the late
1970s.

Why are things so bad?

Sure, there was a financial crisis. But that was five years ago
already.

It’s possible to put a good face on the declining labor force
participation rate by considering it a positive development that
Baby Boomers are enjoying their leisure time in retirement, or that
parents are staying home with their children, or that young people
are staying in school.

At least some of the people working part-time, though, say they
would like to be working full time; in July an estimated 8.2
million Americans were working part-time for economic reasons, the
highest number in a year.

Part of the problem is Obamacare. Sure, all the mandates haven’t
kicked in yet. But businesses consider the cost of future mandates
in making hiring decisions.

The clearest explanation of the effect of Obamacare on
employment that I have seen recently comes in a paper by a
professor of economics at the University of Chicago, Casey B.
Mulligan, recently released by the National Bureau of Economic
Research. He writes that the Affordable Care Act, along with other
expansions in safety net programs, has created “a massive 17
percent reduction in the reward to working.” As a result, he says,
“it is unlikely that labor market activity will return even near to
its pre-recession levels as long as the ACA’s work disincentives
remain in place.”

Much of the discussion about the effect of Obamacare on the job
market has focused on the behavior of employers. One of Professor
Mulligan’s contributions is to consider the incentive effect on
employees, or would-be employees.

He offers the example of a person comparing a 29-hour-a-week job
without employer-sponsored health insurance with a 40-hour-a-week
job that includes employer-sponsored health insurance. Given the
subsidies that the federal government provides for health insurance
under Obamacare, the person ends up with more money, and the same
amount of health insurance, by taking the part-time job.

“Moving from-full-time employment to part-time employment can
trigger generous assistance with health insurance and out-of-pocket
expenses that can offset much of the income lost to reduced work
hours,” he writes. “Under the ACA, it will not be extraordinary for
people to be able to have more disposable income from a part-time
position than from a full-time one.” 

As Professor Mulligan’s paper puts it, Obamacare’s provisions
combined “raise marginal tax rates in 2015 by 10 percentage points
of total compensation, on average, for about half of the nonelderly
adult population and zero percentage points for the rest.”
Professor Mulligan describes the results as “startling,” which may
be understating it.

Now, one might object that these calculations are so complex
that no American who is not a TurboTax programmer or a certified
public accountant, or both, will be able to figure them out clearly
enough to make a decision on whether to work full-time or part-time
based on them. Perhaps. But families making decisions about, say,
whether a spouse goes to work full time or stays home with the
children have a way of being surprisingly sophisticated about such
matters.

One might also object that for many Americans, full-time work is
less a cold economic-cost benefit calculation and more a matter of
a fulfilling mission or calling that yields psychic rewards not
easily measured in dollars or cents. That may be true for some
people, but it’s not necessarily true for everyone.  If the
economic rewards for paid work aren’t there, people may choose to
seek their psychic rewards through volunteering or by working at
home baking bread, growing vegetables in the backyard, or reading
to their children in ways that don’t show up on the Bureau of Labor
Statistics payroll survey.

Anyway, you don’t need to be a economics professor at the
University of Chicago or an official at the Bureau of Labor
Statistics to figure out that if individuals can end up with more
money, or about the same amount, by working 11 fewer hours a week,
plenty of them will choose that route, with the bill paid by
borrowing from China and future generations and by taxing mostly
people working full paid work weeks (or retired after doing so for
decades). It’s a sobering message for Labor Day, and one to keep on
mind on Friday when the unemployment number is announced.