Friday 11 April 2014


Income-linked benefits with abatement regimes can do nasty things to work incentives. Here's Casey Mulligan on the recent changes to US health care:
Under the Affordable Care Act, between six and eleven million workers would increase their disposable income by cutting their weekly work hours. About half of them would primarily do so by making themselves eligible for the ACA's federal assistance with health insurance premiums and out-of-pocket health costs, despite the fact that subsidized workers are not able to pay health premiums with pre-tax dollars. The remainder would do so primarily by relieving their employers from penalties, or the threat of penalties, pursuant to the ACA's employer mandate. Women, especially those who are not married, are more likely than men to have their short-term financial reward to full-time work eliminated by the ACA. Additional workers, beyond the six to eleven million, could increase their disposable income by using reduced hours to climb one of the "cliffs" that are part of the ACA's mapping from household income to federal assistance.
As StatsNZ is starting to link up all their individual datasets, we might finally be able to start working out whether New Zealand's Working for Families regime had similar effects on second earners in particular income/child categories. WFF benefits abate with family income and so strongly increase effective marginal tax rates. Since second earners' labour supply is more elastic, this ought to have disproportionately affected female labour supply. It's a Masters thesis waiting to be written.


  1. Read that the other day and while you have reported it in a neutral kind of way - the original was a bit 'tut-tut' - its heading being "The ACA: Some Unpleasant Welfare Arithmetic". But I thought it sounded positive - people are now relieved of some of the financial worries and risks they once had - so they spend more time with their families or doing some fun stuff. Does not sound unpleasant to me.

  2. Affordable health care for a New Zealander family small costs about $3000.
    Go on challenge me, see what you don't get, I will decimate Southern Cross so quickly.

    Southern Cross NZ will not cover you overseas, and Southern Cross travel, will drop you off at the tarmac where you have no cover.
    Southern Cross is a scam. Be brave here Eric, these are Paul Scott's words not yours.
    NZ Insurance health is a scam, go on challenge me, you will be uncomfortable.

  3. Well, we've been insured with Sovereign for the past, umm, 7-8 years. We've had need to call upon their assistance once, and they were fantastic. Everything was pretty simple, no hassles.