Explaining the Effect of Medicaid on the Labor Supply

Funding health care is a contentious issue in the United States today, and is even considered by some to be one of the most challenging issues that our government faces. One of the important questions surrounding its use is... [ view full abstract ]

Funding health care is a contentious issue in the United States today, and is even considered by some to be one of the most challenging issues that our government faces. One of the important questions surrounding its use is whether or not it is responsible to increasing the labor supply or decreasing the labor supply. Especially with the (fairly) recent passage of Obamacare, which called for increased state funding of healthcare, Medicaid, or subsidized healthcare for those with low income is a contentious issue.  Some postulate that increased eligibility (and thus increased funding) will cause an income effect, in which Medicaid increases the wealth of low-income people and thus discourage participation in the labor force, also known as the income effect.  Others believe that the increased health that comes as a result of increased Medicaid will increase the health of workers and as a result allow more low individuals to enter the market.  A regression was run incorporating family characteristics, social benefit programs, using data gathered from the Current Population Survey. Based on the regression, I find that expansion of Medicaid has a statistically significant negative effect on the Labor Force Participation rate.