Over at the Wall Street Journal, the Heritage Foundation’s Salim Furth has a post looking at whether the Affordable Care Act has increased or lowered wages. Before he looks at the wage data for the first half of 2014, which is now available, he gives a good summary of who said what on the issue:
Predictably, fans of the ACA claimed it would raise wages. David Cutler, Karen Davis and Kristof Stremikis projected that health care costs would fall and the savings would be passed on to workers in the form of higher wages. Dean Baker, Josh Barro, Polly Cleveland, and Donald Marron all argued that because the ACA lowers labor supply, it must raise wages.
In response, Greg Mankiw pointed out that this conclusion can be drawn only if all else remains equal, which is surely not the case under the ACA.
Skeptics and opponents of the ACA argued either that increasing labor costs would specifically lead to lower take-home pay for affected workers or more generally that the ACA would decrease efficiency in the economy. Michael Cannon and Paul Howard argued that in order to keep their existing health insurance plans, some employers would have to cut real wages. Henry Aaron and Gary Burtless wrote that higher costs for health insurance would lower non-health insurance compensation.
Casey Mulligan and Trevor Gallen modeled the ACA and predicted lower wages due both to lower productivity and the (still-looming) employer penalty. Reihan Salam and my colleagues James Sherk and Patrick Tyrrell argued that the ACA will encourage companies to shift from labor to capital, reducing payrolls. Another colleague, Curtis Dubay, predicted wage suppression due to the many taxes in the ACA.The Economist warned that the ACA subsidizes low-wage work, shifting the wage distribution downward.
Now, looking at some preliminary data, the trend isn’t good:
Elise Gould, the Economic Policy Institute (EPI) report’s author, highlighted in a blog post just how bad a year it has been for wages. There are some caveats: Her data describe the wage distribution, which combines changes in individuals’ wages with changes in the composition of the workforce. But, regardless of the cause, Table 1 shows that for 9 out of 10 percentiles measured, the past year was worse than the average wage change since 2007.
We need more data to be sure but as he concludes, sadly, so far the “initial evidence is thus firmly in favor of the ACA’s skeptics.” At the very least, he advises, that data should encourage the proponents of the law to reconsider some of their assumptions.