If Obamacare reduces undertaking supply, volition it heighten wages?

In a twosome of recent articles written past times smart economists, I bring read the next claim: CBO says the incentives inwards the Affordable Care Act volition cut back task supply. If it does, thence existent reward volition increase.

That sounds similar reasonable, textbook economics. But I don't shout out back it is true. The occupation is that the logic is alone partial equilibrium. It is belongings everything else constant. But that is sure non correct inwards the long run. Lower labor supply means lower income, which agency lower saving, which agency lower investment, which agency a lower upper-case missive of the alphabet stock, which agency lower productivity, which agency lower task demand.

Perhaps the easiest way to shout out back most this number is inwards the context of a Solow growth model. In the Solow model, the steady-state existent wage is a business office of technology, the saving rate, in addition to the population growth rate. If task provide per mortal all of a abrupt falls by, say, 2 per centum in addition to stays there, the existent wage volition ascension initally, merely it volition eventually render to its onetime level. Steady-state income per mortal falls past times the amount 2 percent.

One final result that mightiness occur is a alter inwards the composition of task income. If the Act reduces task provide primarily alongside the low-skilled, piece non having that final result alongside the highly-skilled, thence nosotros mightiness become a alter inwards the relative reward of skilled in addition to unskilled. But an overall increment inwards existent reward seems unlikely.
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