Has the CBO missed something?

Probably not, but I’ll ask the question and see if greater minds than mine will weigh in.

The CBO’s Budget and Economic Outlook for 2014 to 2024 says that some workers, mostly very low wage workers, will reduce their hours by an amount approximating 2 million jobs. So what is going to happen with all of those lost hours?

Imagine if a guy who worked at McDonald’s and Walmart quit the McDonald’s job thanks to the provisions of the Affordable Care Act. What is McD’s going to do? One of four things, would be my guess:

1) Limp along, and perhaps close a store because they can’t find anyone to work there.
2) Replace the position with technology.
3) Hire someone who is currently out of work.
4) Increase pay or benefits to attract job hunters, who are no longer as desperate as they were, to unpleasant jobs.

The third possibility seems most likely to me. As long as there are unemployed people looking for some extra cash, McDonald’s is going to have a ready supply of desperate people to humiliate in exchange for low pay and no benefits. Some of those people will be people who wouldn’t have taken a minimum wage job before, because that would mean working for less money than they need to support their families while wasting 30 hours a week that could otherwise be used for job hunting or self improvement. Now, with medical expenses covered, they might be more willing to take what they can get.

I just don’t see all of those hours disappearing. I can see some cases where someone may quit a low wage job and the business might limp along for a while without someone to fill that position, but the CBO’s estimate of 1 to 2 percent of hours worked seems high to me. And I think they missed the reserve of unemployed people who will be hired to fill those lost hours.

Stylized image of CBO Report cover