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Goldman On The Affordable Care Act And Labor Force Participation

Garrett Cook

Goldman Sachs (NYSE: GS) released a note Wednesday morning on the impacts of the Affordable Care Act on the Labor Force Participation rate.

Since the 2008 recession, as America has aged and as the labor market deteriorated, the participation rate dropped from 66.1 percent to 62.8 percent most recently. Much of the commentary surrounding why this has happened has focused on America's aging population being the culprit and not a demoralized youthful workforce.

According to the report, "The availability of retiree health insurance has been shown to significantly affect retirement decisions among workers between ages 55 and 64". A poll that is cited revealed 19 percent of those retired now would have retired sooner had there been more certainty surrounding health benefits. The report notes that, "benefits could weigh on the participation rate by around 0.1pp" and offered a vague upshot by claiming this impact could be "outweighed by other factors".

The impact of health care availability on retirement decisions is felt most in those near retirement, age 60-64, than in those who are age 55-59. Goldman points out "the annual probability of retirement--i.e., what share of workers of a given age will retire within the next year--is on average between 2% and 8% higher when retiree health insurance is available".

As for the Labor Force Participation rate over the near term, expect it to stabilize around here before slowly climbing back up as debt-laden graduates begin seeking jobs to repay their student loans.

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