The latest job numbers for Ohio should give policymakers considering Medicaid expansion reason to pause, at least if they want to keep creating jobs and getting Ohioans employed.

While Ohio gained 5,300 private sector jobs in July, the labor force shrank by 11,000—that is, there were 11,000 less people either actively employed or seeking employment. This comes after two months of modest labor force improvements, which followed a dismal 32 consecutive months (from March 2010 to December 2012) of labor force shrinkage.

Unfortunately, expanding Medicaid is likely to exacerbate the problem of Ohio’s shrinking labor force. This is because it is likely to increase long-term unemployment that will prompt some people to simply stop looking for work. As this phenomenon grows, those people not looking for work will begin to no longer be considered as part of the labor force, thus shrinking it. In other words a shrinking labor force can artificially improve a state’s unemployment rate while covering up long-term and structural joblessness.

As we mentioned in a previous blog,

A new research report from the National Bureau of Economic Research (NBER) . . . . [found] that expansion of Medicaid will further increase unemployment by creating additional disincentives for individuals on public assistance to find work.

‘Using CPS data, we estimate that between 840,000 and 1.5 million childless adults in the US currently earn less than 200 percent of the poverty line, have employer-provided insurance, and are not eligible for public health insurance.

Applying our (NBER) labor supply estimates directly to this population, we predict a decline in employment of between 530,000 and 940,000 in response to this group of individuals being made newly eligible for free or heavily subsidized health insurance. This would represent a decline in the aggregate employment rate of between 0.3 and 0.6 percentage points from this single component of the ACA.’

We also referred to work done by Nicholas Eberstadt of the American Enterprise Institute finding that men are increasing leaving the workforce:

A recent story from Nicholas Eberstadt of the American Enterprise Institute illustrates how dire the current job market is, particularly for men, despite all the sunny talk of declining unemployment rates.

‘In 1953, about 14 percent of adult men were out of the labor force—around one in seven. Today 30 percent are neither working nor seeking work—nearly one in three.

…In the early 1950s, practically all men in this age group (25-54) were either working or looking for work—fewer than 3 men out of every 100 were out of the labor force. By contrast, over 11 out of every 100 men of prime working age are completely out of the labor force today—one in nine, fully four times the fraction back in the early postwar era. This flight from work at prime working ages accounts for the vast majority of the 13 percentage point drop in employment ratios reported for this key demographic group over the past sixty years (i.e., 1953-2013)’

Earlier in the piece, Eberstadt states that if employment ratios were back at their peak from the Eisenhower era, a whopping 20 million more men would be working.

Given that the majority of the Medicaid expansion population are men, these two studies, combined with Ohio’s own challenges with labor force development, indicate that expanding Medicaid will likely result in fewer Ohioans working. In fact, it will probably mean fewer people looking for work at all.

Governor Kasich and the General Assembly deserve a great deal of credit for facilitating a recovery in Ohio. The workforce hole Ohio had fallen in between 2000 and 2010 was enormous. In fact, Ohio lost the second highest number of private sector jobs in the country at nearly 620,000 (Only Michigan eclipsed that number with over 700,000 jobs lost).

That we are beginning to climb out of the hole is positive. But the recovery is proving uneven. Now is not the time to risk falling back in the hole by implementing a policy in Medicaid expansion that is likely to drive people who are currently working out of the labor force.