Do Mandated Benefits Reduce Employment? An Analysis of the Affordable Care Act Using Firm-Level Data

Awarded Scholars:
John Sutherland Earle, George Mason University
Project Date:
May 2018
Award Amount:

Co-funded with the Robert Wood Johnson Foundation

The employer mandate under the Affordable Care Act (ACA) requires businesses that have 50 or more full-time equivalent employees to provide “affordable and adequate” health insurance (defined as covering at least 95 percent of full-time employees and their dependents and at least 60 percent of expected health care expenses, not to exceed 9.5 percent of the employee’s household income) to full-time employees, or to pay a penalty. While the mandate was implemented to increase insurance coverage among workers, opponents of the ACA have argued that the mandate could incentivize firms to reduce the number of workers they employ, shift from full-time to part-time workers, or expand the use of contract workers to avoid meeting the mandate requirements. Until now, data limitations have prevented researchers from estimating the causal effects of the employer mandate on employment because household surveys and establishment-level surveys do not provide accurate measures of the workforce at the firm level (only at the establishment or workplace level), making it difficult to identify treatment and control groups close to the threshold. Using new comprehensive firm-level panel data from the Longitudinal Business Database (LBD) and estimation methods that exploit the regulatory thresholds in the mandate, economist John Earle will estimate the causal effects of the ACA employer mandate on employment.


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