My name is Mark Siegler and on behalf of the McLean Center for Clinical Medical Ethics, I welcome you to today's lecture, the third in our seminar series on ethical issues in health care reform. Some of you remember that last week Mark McClellan spoke about next steps for health care reform and I do want to mention that next Wednesday the Dean of the Biological Sciences Division Dr. Kenneth Polanski will be speaking on the topic how health care reform will affect the mission of University of Chicago Medicine. I would encourage you all to attend the Dean's Talk next week. Today it's my pleasure to introduce you to our speaker Casey Mulligan, Professor of Economics here at the University of Chicago. Professor Mulligan and I met sort of in the traditional University of Chicago way when we sat on a university committee together. It was a great opportunity to learn about Professor Mulligan and his work. Professor Mulligan is affiliated with the National Bureau of Economic Research, with the George Stigler Center for the Study of the Economy and the State, and with the Population Research Center. You may know him as a frequent contributor to the economics blog in the New York Times at NewYorkTimes.com and also a contributor to the op-ed pages of the Wall Street Journal. Professor Mulligan's interests include the study of transmission of economic status from one generation to the next, social security, aging, retirement, wage inequality between men and women, capital and labor taxation, and the economics of aging. For his outstanding work in the field of economics, Professor Mulligan has been granted numerous awards and fellowships, including those from the National Science Foundation, the Alfred Sloan Foundation, the Smith Richardson Foundation, and the John Olin Foundation. Today Professor Mulligan will speak to us on the topic affordable care and the labor market. Please join me in giving a warm welcome to Professor Mulligan. We're on a committee together and we're one of several committees concerned with retaining employees and turnover, compensation of employees, and that's what I want to talk about today on a national level, not just in our own little community here. So I'm going to show you a few results. Is that better? Yeah, Mark and I, he mentioned we're on a committee together and he didn't mention the topic though, it was about compensating our employees, retaining employees, dealing with turnover.  And what I wanted to do today is to talk about those sort of issues on a national level rather than just our little community level. So I'm going to show you a few results on the impact of the Affordable Care Act on incentives in the labor market and ultimately labor market performance. But before we get started, I think we got to remember that the Affordable Care Act is a complex piece of legislation and my expertise really lies only in the parts of the act that relate to the labor market generally. I'm not going to have anything to say to you today about, for example, the labor market for physicians. A lot of you might be interested in that. There are a lot of MDs here today, right? It's a good place for me to have a heart attack if I'm going to have one. We'll come back to that kind of reasoning. But really, I'm not an MD. I'm not a biologist. And so I don't have anything to tell you about what the law is going to do to the health of our population, which is an important topic. So that means that the results I'm going to show you today, they don't really tell us by themselves whether the law is a good idea or not. I hope somebody is going to combine some dollar estimates of the types of costs and benefits I look at today with dollar estimates of the costs and benefits of the health consequences of the law. And then we could have kind of a bottom line conclusion. But I don't have that for you today. I understand this is not an audience of economists. So I wanted to start with a little introduction on the economic concept of tax distortions. And that refers to the fact that businesses and households adjust or change, sometimes we say distort their decisions in order to reduce the taxes they pay and or enhance the subsidies they receive. And I thought it would be good to have an example. Ethanol subsidies, now they've become mandates. These were subsidies where gasoline refiners were given a tax credit. On the basis of how many gallons of ethanol they produced. And naturally it encouraged refiners to make ethanol. Now a lot of ethanol is produced with corn. So the credit encouraged farmers to use their land for corn that would go into ethanol rather than using their land to make food for people or for livestock. The tax credit raised food prices and all the consequences that go with higher food prices. The people who use fuel used it differently as a consequence of the credit. More likely to use ethanol in their engine than regular gasoline. And that has consequences. Corrosion of the engine and fuel economy and things like that. So these are examples of tax distortions because there are changes to behavior for tax reasons or subsidy reasons rather than behavior based on purely business and personal reasons. Another example we're going to talk about today, closer to the Affordable Care Act, will be the decision of some businesses to push their employee work schedules down to 29 hours a week. And to the extent they do so, they're doing it not for business and personal reasons of their employees. They're doing it to avoid an IRS penalty. And that's another example of a tax distortion. Tax distortion is another thing you should recognize from economics. This is not a linear relationship. A 10% tax is more than twice as damaging as a 5% tax. So that influences some of our thinking about tax distortions. Sometimes we call it a tax wedge. Now let's remember that that sounds kind of gloomy about taxes. But none of this means that we shouldn't have taxes and we shouldn't have subsidies. It just means that the taxes and subsidies need to generate sufficient benefits to justify the sorts of costs of the tax distortions with the ethanol or in particular the labor market distortions I'm going to talk about today. Now there are four types of provisions in the Affordable Care Act. I'm going to call it the ACA to save a little breath from now on that affect the supply of and demand for labor. The first I'm going to list is the large employer mandate. And it penalizes employers, large employers who don't offer insurance. Which can be important for the analysis of tax distortions is the way the penalty is figured. It's in particular, it's levy on the basis of the number of full-time employees. More full-time employees, it's going to mean who aren't covered, it's going to mean more penalty. The second, not necessarily in order, second provision is known as the individual mandate that people, households and individuals, they need to buy insurance for their family or get a hardship waiver or pay a fine on the basis of their income and family size. They got three choices under this rule, one of those three. The third provision and we'll see it can be the biggest are personal income tax credits that are awarded to families so that their health expenses are affordable. I put that in quotes because there's a legal definition of affordable here. What's going to be important for our purposes, two aspects of this are going to be important. Again, it's how's the credit calculated, two aspects are important. Number one, it's based on household income. The more income the household has, the less credit they're going to get. The other thing that's important, I've listed it third here, is regardless of your household income, how low or not low it might be, if your employer already offers you affordable coverage, you don't get any credit, zero, regardless of how high or low your income may be. So that's going to figure into the incentives and the distortions we're going to look at. And the fourth group of provisions in the law relate to Medicaid eligibility, explaining it in a few different ways on the basis of income and asset testing. So I think to get inside this complexity and organize a little bit, I think it helps to think of the economy at first in terms of three sectors. And that's why I put a pie in here with three pieces. On the bottom would be, you might call it a sector, the home sector or the non-market sector. It represents people who are not working for pay. On the left are going to be sectors where employers usually offer health insurance coverage to their employees. And the education sector would be a great example there. And the inter-mercia of Chicago would be the number one supplier in that sector, of course. And then on the right we have sectors where health coverage is not offered all that often. And the restaurant industry, especially smaller restaurants or non-chain restaurants, would be a good example there. Now I've drawn some arrows in here to represent the economic forces that will be put in place by the law. The law is going to tend to push people down out of both types of business sectors into not working. And I'll show you how that works. We also tend to push people from left to right. And the big question is, what are the size of the economic forces represented by the arrows? How much force is represented there? Now we economists don't, unlike the physicists, we don't measure forces in Newtons or something like that. We measure it in terms of the amount that these forces are distorting market prices. And what I'm going to do on this side is give you a few examples. You won't understand yet where these numbers come from, but I'll give you a few examples of the size of the forces measured that way. So the first entry I have here is a 30, this is measured in logs, a 30 log point wedge between employer cost and employee benefit in the market for low-skill labor. Put it another way, maybe in less technical terms, the law is going to increase employer costs about 30% relative to employee benefits. So if employee benefits were constant, that means employer costs would go up 30%, or if employer costs were constant, that means employee benefits would go down 30%. It's introducing that kind of gap. And you can see how that works. If we're going to be increasing employer costs or reducing employee benefits, we're going to have less jobs and less employees. Employers don't like costly jobs and employees don't like jobs that have few benefits. Now some of the tax distortions that you may have in the law, an ethanol might not be a good example, but some distortions are intended. The view of policy makers is that certain activities aren't happening enough and we want to push activity in the right direction. And there's some of that going on with the Affordable Care Act. In particular, I think policy makers think that not enough people have insurance. So I want to push the labor market in the direction of having more insurance. But that's not what I'm going to talk about next. What I'm going to talk about next is how that push is not uniform across different types of workers. An example, let me show you the result, that the law is going to reduce what I call the skilled premium by 18 logpoints, about 20%, for employers who have insurance that they offer versus employers who don't. Maybe an example I like to use is the laws in California for water.  And if you're just a homeowner with a bathtub, you get another price for water. And it's one thing to say, oh, I want to help farmers. But what they do with that law is they're encouraging, giving their farmers to help in a very specific way, which is water. In fact, the farmers aren't even allowed to resell their water to the people with the bathtubs. So you get an inefficient use of water that isn't necessary just for the goal of helping farmers. It's the same sort of thing here. We're going to have an inefficient use of labor that isn't necessary from an economic point of view. I'm no expert on politics and what it takes to pass laws. But it isn't necessary from the point of view of getting the sectors that have insurance to expand relative to the sectors that don't. And then the third types of distortions are going to be costs. Employers, some types of employers are going to see their costs go up. Others are going to see their costs go down. And this isn't about general inflation here. It's about relative costs. And when employers have their costs changed, they're going to pass that on to their customer. Ultimately, customers are going to pay those costs. And so what I've shown here is that these are for selected sectors. Some sectors are going to see their costs, and ultimately, when they have to charge their customers, go up by 12%. Others less. Others will see their costs go down. So now you're going to see sectors expanding and contracting as the customers experience these cost changes. And we'll look at those as well. So these are pretty big changes. I wasn't talking about a 1% change in a price in the labor market or a price in the market for goods. We're talking about dozens of percent changes in prices. And these large wedges, they're going to have consequences. Don't expect all these new incentives to come in place and people just to continue business as usual. It's not going to happen. There are going to be a lot of consequences. Big wedges are going to have consequences for the size of the labor market, for the importance of different sectors in the economy. Not only the issue of whether people work or not, but what type of work are they going to be doing? How are employees getting paid? How's their compensation structured? What's going to be the amount of their compensation? How's it going to impact that, impact the amount the government spends and the size of the deficit? So these are consequences of these wedges.  I kind of threw some numbers at you. I'm going to drill down a little deeper and explain to you where do these incentives come from and then we can look at the behavior. So I think of these in two parts. First are the incentives. What are the size of the forces being put in place in the economy? And then the second question is how will people react? If you're into boating, there would be a question of how hard is the wind blowing? And then what's going to happen to my boat? Those are separate questions and the first one you want to know is how hard is the wind blowing? Okay, so we're going to drill into that 30 log point number, the wedge between employer costs and employee benefit. We're going to drill into that and show you how that works. What's going to happen to most of the middle class is going to see their reward to work eroded. Even though the reward to work varies a lot across people.  It depends on a lot of things, but it turned out the act kind of hits people no matter where they fall. And I'm going to show you a few places they might fall. One place people might fall is they might be in a type of job where there tends to be an employer insurance. And those people were going to see their reward to work eroded as well. And the reason that is, remember I said that the tax credits to help you pay for your health expenses, premiums and out-of-pocket costs, you can't get those if you're on the payroll of a business that offers health insurance. You can't get them. But the moment you leave the payroll, now you can get them. Or if you're out of work and you join the payroll of such a business that offers health insurance, your credits are going to stop. So this is a new form of kind of unemployment insurance, or in general not working insurance, assistance. These are subsidies that, if you're this type of worker, you only get during times when you're not working. And that's going to be, that's going to reduce the reward for working and reduce the pain from not working. You can look at it either way. It's the same thing. Now not everybody works in an employer offers insurance. That's why we have the law in the first place, I suppose. So let's look at those people. What about people who, when they're working, their employer doesn't have a plan for them, so they're going to go on these exchanges and buy insurance? They're going to be eligible, depending on their family income. If it's below 400% of the poverty line, they're going to be eligible for a subsidy. But let's remember how the subsidy's calculated. It's based on the household income. The more the family earns, the less help they're going to get. And it turns out, and I'm going to show you some more detail on this, we'll drill down here as well, that every dollar of family earns in this category will cost them over 20 cents in lost assistance for health expenses. On top of all the other taxes that they pay is a consequence of working more. And then the third category, some people have employer insurance, some people have exchange opponents, some people be uninsured. One can argue about how many, but there will be still some people uninsured, but they're affected as well, because there's the individual mandate there, and remember the three things, one of the three things you had to choose as an individual. Either get yourself insured, be in hardship, or pay the penalty. Well, unemployment, of course, is a hardship. So, starting next year, being unemployed will give you relief from that penalty. And that's going to be an extra kind of assistance for people who are unemployed, or you want to look at the other way, it's an extra thing that workers have to pay if you're in this third category. So pretty much, whatever bucket you fall in as a worker, or a potential worker, your law is going to be eroding, your reward to work, and your losses from not working. I mentioned pretty much the number one set of provisions relates to the tax credits. Here's a table on how the tax credits work. This is assuming, again, you don't have an employer's offering insurance. It's based on your household income. Each row represents a household income range, and here I have an express household income in dollars per year. It's probably the most familiar way you are. You're most familiar with seeing incomes that way. Here I've measured it as a ratio to the federal poverty line, which depends on your family size. But when you do it this way, you can use the same table regardless of how big the family is. Now, the federal poverty line, again, it depends on the family size. Think of it as roughly $20,000. So four times the federal poverty line would be like $80,000, varying on the family size. Twice the poverty line would be like $40,000. And I have two columns here. And the first column indicates how much the family will owe in health insurance premiums. There's a cap on what they're going to owe in a fairly low cap. Take, for example, in the first row, if your family's at 105% of the poverty line and you purchase one of these plans, you'll be asked to pay no more than 2% of your income toward the premium. Now, the rest of the premium will be paid for by the government. So you'll send in your premium check. The government will send in a premium check on your behalf so that the insurer gets the full premium. The second set of assistance that people may get, depending on their family income, is with the out-of-pocket costs. These plans will involve, in fact, that's part of the design, that people have some out-of-pocket costs. When they go to the doctor, they may pay something, they'll have a deductible based on individuals and families and so on. But if your family income is low, you're going to get discounts on these out-of-pocket costs. And the size of the discount depends on your family income. So what I've done next is add together these two types of assistance. They're both assistance and dollars, so we can pretty much add them up. At least on an average point of view, we can add them up. Individuals may have different health situations, different propensity to visit healthcare services, and then they would emphasize these columns differently. But on average, we can add them up, and that's what I've done here. Now the household income that I showed in rows, it showed horizontally here in a graph. I didn't show it infinitely to the right, but basically everything that happens after four still applies to people at 6, 7, 8, 9, 10, times the poverty line. There's not an exact number for the dollar amount of assistance you get. There's a little bit of a range that depends on how old your family is and things like that. So I've shown the range here in blue and red. So there is a little bit of a range. The vertical axis is also measured as a ratio of the poverty line. So again, you want to convert it to dollars. You have to multiply by the poverty line for your family size, roughly $20,000. And we can see that as the household income rises, the assistance rises. And when you get to 400% of the poverty line, the assistance stops altogether. And that's why I've indicated in the right here that these people are paying full price. Technically that's not right because a lot of people have insurance through an employer and that has a tax advantage. We're going to put that to the side for a second. We actually can put it aside as I'll explain later. But for now I'm going to call that full price. So one thing I've just read in the San Francisco Chronicle today, a personal finance columnist explaining to people, you know what, if your income's around in here, you might want to think about ways of earning less because you're going to no longer have to pay full price for your health insurance. And she did a good job of explaining. Maybe not from the Treasury's point of view, she didn't do a good job of explaining, but from the Reader's point of view, she did a good job of explaining how that works. So what happens if you spend more time unemployed, more time on maternity leave, working part-time rather than full-time?  On an average, this is the same number I mentioned earlier, on average for every dollar of family income you give up, you're going to get back 20 to 25 cents in terms of assistance with your health expenses. I say on average, because you can see the line, it's got a lot of wiggles in it. And that's on the average, some of these ranges, like the range that the lady in the San Francisco Chronicle was writing about, it can be quite a bit bigger, other ranges smaller, but on average 20 to 25% would be lost. Now this applies only to workers who are getting their health insurance on the exchanges. Remember, if you're getting health insurance from your employer, you don't use this scale. You don't get tax credits. But if you're working on the exchanges and you work less or you work more, you're going to see your assistance adjust accordingly.  But now let's work at workers who have insurance. By all estimates, more people will have insurance on their job than people who will be participating in these exchange plans. It's a big part. Maybe 40% of the workforce or something like that has insurance on their job. What about their incentives? Well, as long as they're working, they're paying full price. With that caveat I mentioned earlier, they're paying full price. The moment they stop working, they're put on the schedule. Where are they put on the schedule? That's the point that corresponds to their family income. So the moment they leave that job, the subsidy turns on.   As opposed to sliding along it that some people will do if they have exchange plans when they're working, these guys will jump onto the scale.  But there's another way to jump onto the scale in many cases, which is going to be by working part-time. Even if a lot of employers, I actually forget how the University of Chicago does, a lot of employers, they offer health insurance only to their full-time employees. Part-timers don't get it. So if you were to switch positions, even staying with your employer from full-time to part-time, you'd lose your eligibility for the employer insurance, meaning you would turn on your eligibility for these subsidies. So that's going to be another way to jump onto the scale. And that's what I wanted to show you next. To give you an idea of the big bucks that are involved with jumping onto the scale. So this is just an example. This doesn't represent everyone in America. There are millions of different outcomes for Americans, and we crunch those by computer, but it's an example that we can learn a lot from. And in this example, I want to consider a specific person who's deciding or thinking about, or maybe their employer's deciding or thinking about, should they work part-time or full-time? So I'm going to start with the employee costs of that decision. First of all, it's hours work. If you work full-time, you've agreed to be at work. Doing work more hours. So here I'm going to say 40 hours. The part-time position has lesser costs. You only have to work 29 hours. I'm also factored in work expenses. Something like a commuting cost. If you're only working three days a week, that's less bus pass you have to buy or less train tickets you have to buy or less gas for your car you have to buy for the purpose of working. So I've put that in as well. So 40 hours per week and $100 per week. The results in this table are for the year 2014. One reason I chose that year is because it's coming real soon. The other reason I chose it is there are no employer penalties next year. So just to be clear to everybody, what I'm going to show you in this table has nothing to do with the employer penalty because it's for next year when there are none. There's some fascinating stuff in this table. As it is, we don't need to put in employer penalties yet. So let's look at employer costs. These first rows on an hourly basis, both these types of employees in this example are going to cost the employer $26 an hour. And I said that's just an example. We're not talking about a minimum wage worker here, though. A lot of these types of calculations, if you've seen them before, or you remember back when you took economics, you saw these type of calculations. They're often done for pretty poor people, people in minimum wage jobs. Anything close to a minimum wage job. It's not super-rich, but it's not a minimum wage either. So this employee is going to cost $26 an hour either way. The annual compensation, of course, is less for the part-time employee because the part-time employee doesn't work as much. The part-time employee only costs $37.7 as opposed to $52,000. If you're following along with the arithmetic I've shown in the right column how you calculate one column from another. The next group has to do with health expenses. Now some of the health expenses, depending on the situation, are for the employer, some for the employee, some for the government. And either way, under either position I assume that health expenses are going to be on an annual basis, I'm thinking of a family of four here, $17,300. What's different between the two scenarios is how that $17,300 gets paid for. Under the full-time scenario, a lot of it's getting paid for through the employer insurance. The employer and the employee together are paying it. And some of it comes out-of-pocket. As you know, employer insurance is not out-of-pocket expense-free. There's some expenses there. Under the part-time situation, remember they're not going to be on the employer insurance. They're going to be on the exchanges. Now how it gets paid for is very different. Overall, in some sense there's more out-of-pocket costs. That's kind of the idea of the law. What's really different here is, look what the government kicks in. In the red boxes I've displayed, what the government's kicking in. On the full-time position, the government kicks in nothing. Under the part-time position, the government's kicking in $11,000 for premiums and $4,000 for out-of-pocket discounts. Now those numbers are based on, as we saw before, the family income relative to the poverty line. In this example here, the family income is, because I know the family size, it's 145% of the poverty line. And that's what determines the size of their subsidy. But what's going on here is the decision to go part-time rather than full-time turns on almost $15,000 worth of subsidies. That goes a long way toward compensating for the income that's lost by working part-time. Remember the $52,000 row. Employee is producing only $37,000 part-time, $52,000 full-time, but the government is a third party kicking in here and helping with $15,000 of that loss. In fact, in this example, the bottom line income that people have after health expenses and after work expenses is actually greater when they work part-time than they work full-time. That's new under the Affordable Care Act. That's a new situation that can arise when there isn't before the Affordable Care Act. You would have had less income working part-time than full-time. Here you can earn more, and the reason is the subsidies that are turned on. Now this is just an example. I can literally calculate millions of scenarios here depending on family size, how much employer cost is per hour, what's the ratio to the federal poverty line, those sort of issues, whether the spouse works. But there's a general lesson here. We have a new subsidy that full-time employees can't get. Part-time employees can't get it. That changes the calculus of the decision whether to be part-time or full-time worker. This number you might have noticed that income after taxes is exactly the same under the two scenarios. That's a coincidence. That's part of my example. I tried to make it easy on you guys. If that weren't true, and it could go either way, the right column could be a little bigger, the left column, then I'd have to keep track of employee payroll taxes, food stamp benefits, personal income tax, personal income tax to the state government, a lot of stuff have to be kept track of. But the general lesson would remain the ACAs introducing this new and potentially very large form of assistance that part-time employees can get and full-time employees can't. And it comes out from, we looked in the previous picture, it comes from jumping onto the scale. You work full-time, you're paying full-price, you work part-time, you're not paying full-price anymore. Okay, so now we can address the employer penalties, which are due to come in in 2015, a little over a year. Now you've probably heard about some of these penalties. The $2,000 numbers share it a lot. The reality is there are actually three or four penalty categories. One category of penalty is zero. Employers that are small won't hold any penalty. Another category, though we can't forget about this one, is 40,000. There are employers with 49 employees who will find that hiring the 50th one costs them 40,000 a year. Now of course there aren't that many employers who have exactly 49 employees or exactly 50, but when they exist, there's a big number. So if you're going to think about averages, you've got to count the 40,000 in the average according to how many employers experience it. And then the other number, which would be a very common number, would be employers with more than 50 employees. They're going to owe 2,000 for each additional full-time employee. There's also a 3,000 category, which I don't have time to delve into. So that's the first thing to remember. There are categories of this penalty. The second thing to remember, because they're in dollars, it's tempting to compare them to other dollar figures you may see. But you've got to be careful because unlike salaries, these penalties are not going to be deductible from business taxes. And let me show you the consequence of that. So I'm going to think of an employer who's going to cut his employees' wages by 3046 and pay in a penalty pursuant to the ACA of 2,000. I'm going to show you how he's going to have his cash flows held constant there. So the penalty cost him 2,000, of course. Cutting wages saves him 3,000. But because he cut wages, he's also cutting his payroll tax. Because by definition, the payroll tax is a percentage of his payroll. Smaller payroll, smaller payroll tax. So he saves 233 that way. But by cutting wages, he has less to deduct in calculating his business income tax.  So he ends up, if he's at a 39% rate, which is a fairly common rate for both corporations and non-corporations, he's going to owe almost $1,300 extra in business tax. So in the end, this $2,000 penalty is equivalent to a $3,046 salary cut. So you look at it from the employee's point of view, how much does my employer need to cut my salary to be able to pay this penalty, to justify paying this penalty? It's going to be $3,046. So it's really that's why it's boring, I guess, and kind of tedious. But you've got to recognize the $2,000 penalty is not really a $2,000 penalty. It's more like $3,000.  Let me be clear in this complex piece of legislation. I guess that's beauty of complex legislation. There's always some exceptions. And I've listed some exceptions here. You know, the law is going to move some people off of uncompensated care that's means-tested. There's kind of a sliding scale for uncompensated care. You go in as an uninsured patient and they find out you make a lot of money. They're going to squeeze some out of you. If they find out you're poor, they might not. The law may... I'm not an expert on this at all, but some people believe the law is going to bend the cost curve. It's going to make insurance cheaper for employers like the University of Chicago that offer insurance to their employees. And that will kind of grease the wheels of the labor market. And there's some other effects that may happen. The good news, at least for somebody like me, is that I know how to quantify these things as economists. They all have a lot in common with taxes. So we can kind of add them together every once in a while. I have to multiply them. We can do that pretty easily. And we've done that. And these things, they're real, but they're in order of magnitude smaller than the disincentives that I just showed you. So I could drag you through the details, but why drag you through the details is something that's ultimately going to be small. I've showed you the kind of details of the big stuff. This is a chart from the op-ed I had in the Wall Street Journal two weeks ago. It's a chart of what I call the marginal tax rate on labor income. It's for a typical American worker when they decide to work what fraction of their compensation goes to the government in the form of extra taxes or less benefits, less subsidies. And that changes over time. In fact, this index is designed that the only reason it can ever change over time is because there are new laws, new rules. For calculating taxes and subsidies. And there have been a variety of legislation that affected this. What's interesting for our purposes today is what happens beginning in January 2014. We have a big increase in the marginal tax rate. Ultimately, it's going to be 5 percentage points. On top of the 5 percentage points it already increased in the prior say 5 or 6 years. So where people used to, not too long ago used to keep 60% on average. Talked to me in 18 months from now they'll be keeping only half. A little less than half. And that's, you compare 60 to 50 that's a 1 sixth cut in their pay. At least from the point of view unless wages are something to just that's a 1 sixth cut in their pay. As economists I can't stand here and say you know what businesses usually will continue even though people are getting a 1 sixth cut in their pay. It can't happen. There has to be some adjustment in some response to such a big change. And this kind of isn't even fair to show you the picture because this is an average. I said there are millions of situations out there that are different and included in the average going up 10 there's people the average going up 5 next year there's people who are going to experience something different than the average. Here's here's the 5 points I showed for people in the middle typical situations and here's for a low wage worker. Low wage workers are going to see on average among low wage workers they're going to see their tax rate go up by almost 11 points. And I find that interesting because low wage workers tend to be the ones who are more sensitive to these things in terms of their decisions to work part-time, full-time, not at all. Now one reaction to this that I hear sometimes is that hey as long as people get to keep some of what they earn they're going to go out and try their hardest to earn it. It's better to get 1% of your pay than nothing and if you don't work nothing's what you're getting. And that's a fallacy number one number two it's a red herring as I'll explain in a minute. It's a fallacy you know people think about it you know people who don't maximize their income you guys don't maximize your income otherwise you live in New York City people make more there people make sacrifices in their income for other goals quality of life whatever you want to call it some people do that and those some people count in the averages I'm not saying look I'm not saying that everybody always adjusts to everything I'm not saying that but I'm saying on average there's going to be adjustments and the bigger the tax increase you put in front of somebody the more on average they're going to adjust their behavior it's also partly a red herring that even if it were true that it takes 100% tax rate to get people to work less there are people under this new law that will experience 100% tax rate an example with the part time where what did you earn by raising your hours from 29 to 40 less than nothing that's a bigger than 100% tax rate so even if those are the only type of people are going to react those people are going to be out there so either way you look at it you can just expect the labor market to adjust I can tell you another story another retort that I hear in addition to the income maximization theory is that they say that look when people get fired from their job they cry they don't celebrate and I agree that usually happens but that's irrelevant that's another red herring and I'll give you an example maybe that's not so close to home to help you appreciate that now I got to confess I never drowned before I don't know if any of you ever drowned I never drowned I got a two year old out of the water once when he was drowning and there's very clear water I could see on his face he was terrified I would bet that that experience was as bad or worse than getting fired so by that logic that when you're terrified and you're crying in an event that that means that proves that incentives don't matter then you would conclude the look incentives don't matter for drowning either but we know that's not true the commander of the Coast Guard over in Michigan she contacted me and she said Casey I could give you all kinds of data showing you how incentives matter for drowning that boaters in Alaska where the Coast Guard can't help them because the distances are just too great boaters in Alaska take care of themselves they wear the life jackets they got the radio they got the lifeboat they respond to the incentive which is no help means they're going to protect themselves whereas people in New England like Michigan they never wear their life check it they never got the radio they don't got the lifeboat and the Coast Guard knows this the Coast Guard understands that the act of helping people causes them to help themselves less even though the event at issue is a terrifying one I saw my son he was terrified by drowning so what? it doesn't mean the drowning doesn't respond to incentives so that's another that's another red herring yes unemployment is painful it's painful but the ACA is going to make it less painful and maybe we ought to do it for that reason but let's not pretend that people are going to ignore the new incentives and won't adjust their behavior accordingly we're going to have more help for people who don't work and thereby more people not working in that sector so we talked first about the kind of vertical air goes here the people moving down let's talk about people moving from left to right this of course lots and lots of sectors out there so we need to organize a little bit I got kind of two ways I want to carve things up one of them I mentioned to already the different types of workers I'm going to put people in kind of two buckets low skill or high skill I want to carve up the economy is in terms of the types of insurance that people in the different sectors tend to have or will tend to have so one group of sectors I call the employer sponsored sectors the SI sectors the other set of sectors the second one will be where people tend to be on exchanges and the third set of sectors include the uninsured actually that last category is kind of a catch all but mainly they're going to be uninsured people and then so I can say without too much trouble the magnitude involved here I'm going to make a few normalizations here I'm going to assume that employers pay all the taxes even their employees taxes they pay the taxes I'm going to do that to simplify in economics one of the results we have especially in the long run if not in the short run it doesn't matter who pays the taxes the employers, the employees, the customers the retailer doesn't matter who plays it so to make things easy I'm going to assume employers pay all these things in particular I'm going to assume that everybody everybody whether they work or not the type of job they have everybody gets an exchange subsidy according to that scale I showed and then what I'm going to do is for the people who aren't entitled to it according to the law I'm going to make their employer pay for it so I'm going to kind of undo the subsidy on the employer side and all this is for the purpose it's an intellectual exercise to be able to add up all these taxes there are so many if I can put them in one place we can start to add them up and see what's going on with their size and then the last thing we think about as economists is that there's competition especially in the long run the workers are not slaves to their employer they can work somewhere else especially in the long run there can be adjustments on where people apply for new jobs where they don't apply for jobs I can't think of some of the discussion you might have heard about employers kind of being conflicted should they drop their insurance their low-skill employees would love that because that'll turn on a big subsidy for them but their high-skill employees are going to be upset because they're going to lose their tax advantage so what I'm going to do wrestle in front of the water cooler to determine what happens economists don't think that way then there's competition in the labor market if you're on an employer who's not giving you a benefit or would give you you're going to get compensated in cash that's the nature of competition otherwise you would go to that other employer so in the end of the day there's not going to be a conflict wages are going to adjust and the structure of compensation will adjust so that workers can agree with each other so I'm going to go through some of the provisions vertically I'll go through provisions the ESI sectors, the NGI sectors and the uninsured sector the perverse provision I said I was going to get to it not finally I've got to it it has nothing to do with the ACA the ACA kind of leaves this intact it's the value of excluding the health premiums from your employer insurance from your personal taxes you may not have noticed this lately but the employer premiums you pay for your University of Chicago plan that's subtracted from your income before they calculate your payroll tax before they calculate your personal income tax so it's a not only is it nice to have the health insurance but it's also nice to be able to get some of your income out of the reach of those two types of taxes that provision on average is worth these numbers I'm going to show you are going to be for low-skill people if you're in that sector as a low-skill person that's worth about $2,700 a year on average counting as zeros some people in the room maybe work for the University of Chicago but you don't have insurance because your spouse has it and you'd be counted as a zero in there so that's an average the first ACA provision is the employer penalty I mentioned it was $2,000 I made two adjustments here one is the adjustments we talked about that the business taxes the $2,000 penalty also creates some business tax liabilities and the other adjustment I've made is not everybody works full-time and that penalty only falls on full-time workers so on average that penalty is $2,600 what sectors does it apply to? well that's where the yeses are here what only applies to the NGI and the uninsured sectors then jumping ahead the exchange subsidy remember how we rigged it here everybody gets it and then some employers have to pay it back which ones have to pay it back? well the employers who offer insurance have to pay it back because their employees weren't entitled to it and then the employers who have employees who don't get any insurance or maybe you're on Medicaid or something they don't get it either so it's clawed back from them and then finally the individual mandate is people, workers who aren't insured so now we can add these up basically what I do is every time there's a yes for a sector I say okay this sector's got two yeses or three yeses so I got three numbers to add and the total tax on the employer there is about $7,600 in the second column there's only one yes the total tax there is $2,600 in the third column there's again the sum there is about $14,000 the important point is not the amount the overall level of these numbers because I said we're kind of rigging it to put it on the employer side so we can do some addition what's important is look how different they are for the different types of employers they're ranging from $2,600 to $14,000 that's going to be one of these things like the farmers get the cheap water and the people with the bathtubs get the expensive water some of the sectors are going to get low-skill employees cheaply other sectors are going to have to pay a lot for them that's going to create some inefficiencies the department of health and human services what do they say about all this I just showed you a bunch of pretty large incentives one sector is paying $14,000 and other sector is only paying $2,600 some people have seen their marginal tax rates go up 10 percentage points some people have seen them going beyond 100 percent I keep saying look that's got to affect behavior but what does the department of health and human services say they say well nope, our law the ACA is going to improve affordability and accessibility of health care without significantly affecting the labor market what's up with that well, they looked at Massachusetts how did they get that conclusion? they said they looked at Massachusetts Massachusetts also had a health reform they called it Romney Care they had a health reform and in Massachusetts you barely saw any change in the labor market now I agree, I've looked at Massachusetts you barely see any change in the labor market relative to the rest of the country now Romney Care came in right before a terrible recession so lots of things happened in Massachusetts but they tended to happen in other states as well so you don't see any effect any kind of significant effect economically that matter effect in Massachusetts after Romney Care I agree with that evaluation of Massachusetts in a Romney Care the mistake I think is Romney Care and the ACA are not the same thing all the exercise I just took you through for the ACA you could do it for Romney Care those numbers don't really care whether it's Romney Care or Obamacare and we could do that, I've done it and turns out a lot of differences one difference is the Massachusetts health reform really it's designed to leverage the federal tax exclusion it made sense from a state point of view they don't really care about the federal budget state point of view let's try to achieve our goals with federal dollars and the way they did that and it was I can see the sense in it they tried to leverage the federal tax exclusion for it kind of without actually agreeing to it the employer penalty under the Affordable Care Act is 11 times greater than the Massachusetts health reform penalty it's not the same penalty, it's 11 times greater they both have penalties I guess, that's interesting but there are orders of magnitude different the Massachusetts health reform did not introduce any subsidized coverage for unemployed people the Affordable Care Act is doing that and then the last point I'll emphasize is Massachusetts is a different in terms of the number of high school people they have the propensity of firms to offer health insurance even without the reform those are all different and you need to account for those and here's how I account for them here's the 5 percentage point increase in the marginal tax rate I showed you I showed you a couple of times now that's the effect of the ACA and the marginal tax rate in the United States of America here's the effect of Romney Care under marginal tax rate in Massachusetts point 4 versus 5.0 factor of I think it's 12 difference so the size of the economic forces in the ACA are in order of magnitude bigger than the size of the forces in Massachusetts measured on a per capita basis I already recognize that Massachusetts is a smaller place but on a per capita basis the forces in the ACA are order of magnitude bigger so conclusions the ACA sharply reduces the reward to work it induces large wedges by sector and skill I got to believe the labor market is going to shrink significantly how much we haven't finished that yet but I can tell you that I don't see any way to labor market to get back the way it was in 2007 as long as the tax rates don't get back to what they are in 2007 and what's happening with the ACA is tax rates are going further away from where they are in 2007 up beyond 50% rather than back down to 40 it'll reduce productivity that has a lot to do with the sectoral shifts I skipped over there are going to be a bunch of surprises here I think it will be surprising how many people leave ESI employer sponsored insurance I think it will also be surprising you might call this a pleasant surprise on how many people are going to be insured because a lot of these wedges are pushing in the direction of the insurer rather than uninsured and the budget projectors haven't accounted for that yet so that means the program will be more expensive than they thought also for the physicians here you want to know what's going to happen to the man for health care you've got more people with insurance maybe you'll be busy, maybe you'll be highly paid we'll see if people are underestimated by not bringing in the tax distortions people have underestimated what's going to happen next so it'll only take a couple of years and we'll be able to settle this in a historical way but for now those are the prognosis from an economist's point of view thank you let me ask the first question about three days ago in the Wall Street Journal Zeke Emanuel published a paper arguing against a labor shift towards part-time work and he cited data from the last 12 to 18 months suggesting that no one has seen such a shift occur yet I don't know if you saw that particular paper I've heard that argument I didn't see that particular column but what I find strange about the argument is these economic forces that I'm telling you about of 2014 so why should I see them in behavior last year or something like that I don't understand why they're even looking there I know that you hear from employers saying right now here in 2013 I've changed the way I'm doing business I'm putting people down to 29 that's kind of employers talking I don't really listen when they talk I watch what they do and so that Emanuel's approach I appreciate if he's going to go to the data and systematically measure what employers are doing that's good, let's systematically measure it but that's understanding how economics works when the force is off people don't react to it, when the force is on people will so we need to come back I think in two years and measure these things and have the conversation the first one is we were okay two microphones got it so two questions the first one is in your list of potential countervailing forces you mentioned bending the cost curve I want to ask about a related issue which is sort of shifting the cost burden so a lot of private health insurance pays the cost of the uninsured for example so have you done similar estimates for that cost shift and the associated incentives that would come from lowering the price of private insurance because more people are insured that's the first question I can ask the second or wait I had that in a different bullet but that effect I called it moving people off uncompensated care and that's also the order of magnitude lower how much is uncompensated care in an annual basis 30 billion or something I don't know the exact number compared to nations labor income small so we have a history of course of changing tax policy over time partially in response to things like people not working so is there a possible compensatory response to this where people see that you're right people stop working and what we do is we change marginal tax rates for the people who are most affected by this and presumably come up with the money somewhere else which presumably has got to be raising taxes for the rich because you can't take it from money that people don't have I spent a lot of time thinking about the policy response to this here I just say look if we have this law and we follow it as written here's the economic forces but I wonder are they going to adjust that I'm not sure the direction there's a certain point of view that whenever employment goes down we need to respond by giving more money to people who don't work and that'll just make it go down more now maybe it's the right response and the compassionate response but when an economist trying to predict what's going to happen in the labor market I don't know what direction these feedbacks go I'm watching them very closely though and I'm not very confident that I can tell you how many copies of my book sold there's not many there's not enough people reading about the basic economics of these sorts of rules and so there's a lot of denial out there that these things affect the labor market and so when the labor market goes down it's going to be blamed on something else it's going to be blamed on debt default whatever stock market's not going to enjoy this type of journey stock market go down they'll blame it on that and then we got to have more funds for people who are out of work so internationally we know that other countries have much stronger social support systems are people lazier in Canada okay first of all they said that people were lazy in fact my view is people are what they are their personalities don't change but they're presented with different circumstances okay so I'm not saying people are going to get lazy I'm going to say same people equally not lazy equally hard working new circumstances economists for years have been looking at the European economy and saying look they present their people with different circumstances that's why they've traditionally had more unemployment less hours of work of the different rules they have now I've been so busy with America I haven't been able to keep up to date but I kind of think our tax rates may actually be going beyond Europe's anyway that's something we can work out and we can measure what's going on with European tax rates how do they compare to the United States tax rates and eventually to the point where we have the same tax rates I can expect will more or less act the same first I'm going to say I'm one of these skilled workers registered nurse retired so I have a little bit of interest in health care and I've seen people who need health care this is very enlightening to me so that the fact is that if people can get out of working and can get their needs taken care of then they won't work and so social safety nets really stop people from working in addition to which people are going to be who lose their jobs or who can't work are going to be able to sit down and figure all this out oh wow if I cut my hours to ten I will really really really be sitting in the catbird seat I'm not an economist so maybe this is too much of feeling but somehow or other my mind does not pick this up too well well first of all economics says that everybody reacts to everything there are some people who won't react to some people will we're talking about the averages if you're interested in national analysis you're interested in averages now maybe national analysis is boring and I ought to be studying just your neighbor whatever but national analysis includes all the people and some of them are going to react that's not my insight into how brains work that's result of prior research on prior public programs and safety net programs and employment programs in Europe and America and South America and that's a result that the average amount of work is less the less the reward for working is that's been an empirical result now maybe those results are different we have a different kind of humanity now than we used to good luck with that but my view is people are kind of like they used to be and when you put them in circumstances where they're not rewarded well don't expect them to respond real well on average you've described what some people describe as a compassionate program or a safety net program as a program that de-incentivizes the workers could I extend that to parents who save their children from drowning de-incentivizing the need to learn to swim and have swim training the no doubt about that I mean the Coast Guard recognizes that they're de-incentivizing people from protecting themselves but the Coast Guard is not standing up and saying get rid of the Coast Guard they understand that there's a trade off and the fact that they're a trade off doesn't mean you want to go to an extreme and say let's give let's do everything for efficiency let's give up all compassion and efficiency is the only goal it's a trade off and all I'm pointing out is I started with that scale there are different objectives in life and we have to balance them and I'm just showing you one part of the scale which is labor market costs and they may be more than justified by the health gains you get or maybe redistribution is a good thing maybe the redistribution you achieve is more than justified for the cost you create I'm just pointing out the cost I said please let's add up the cost of the benefits and get to the final answer but let's not, because we like the benefits let's not pretend the costs are nonexistent it seemed to me in one of your slides when you were looking at the costs to the employer you didn't take into account this 25% drop in productivity for moving from 40 to 29 40 hours to 29 hours I didn't see that in your calculation that is in addition to the changes that you described presumably the employee hour is making contribution to the employer's bottom line but that kind of cancels so he saved 13,000 on his payroll but he also lost 13,000 in production so that kind of cancels I see, okay, please this is just about your calculations did you factor in like an employee's incentive to save like in 401ks or to raise so if they get a higher salary or they're bringing in more salary they have the potential to save for their future and they might also have the potential to get higher social security benefits far into the future I mean would that factor into an individual's incentives to work or not to work in the present a lot of those incentives were there before the Affordable Care Act and would be there after so that degree they kind of cancel in the calculation we do look at kind of savings before retirement almost all these programs I mentioned don't apply once you hit the 65 then you're on Medicare, you would have been on Medicare without the act you're on the Medicare with the act you don't get the subsidies you would get an employer penalty if you worked with an employer as an elderly person so the employee, the penalty would apply but most of the stuff doesn't apply so for that reason we haven't looked a lot about what people how people are going to kind of enter retirement as a consequence of this stuff it's something important to look at it's also important to look at from the perspective of are we going to see a Medicare reform on the heels of this reform will that disincentive people from saving it's great questions I haven't really worked on I know the questions are there for somebody to tackle though I'm a physician from Lexington Kentucky and a McLean fellow here what about the effect of 8DAC on workforce productivity we know that having health insurance access is a social determinant for health people live longer Medicaid, private sector, insurance those data would support that and so what about the fact that if people more people have health insurance who are in the workforce all get 29 hours per week if they're healthier and have less sick leave perhaps be more productive also what about the health economy sector itself you know 18 to 30 year olds 25, 30% uninsured today a third of the patients we see in our emergency rooms have no health insurance and we know that all those that's all paid for by us who have helped us as well as by government as well as by healthcare providers for those who provide healthcare like the University of Chicago so I'm thinking about the beneficial effects of workforce productivity in the labor market and also I'm thinking about the healthcare economy which could be booming as a result of this new law now the uncompensated care is real but I brought that in I recognized that an offset to everything I had and it was included in my overall Wall Street Journal number includes a subtraction for the uncompensated care effect but when you're talking to 30 billion dollars in an economy that generates 12 trillion dollars in labor income it's not a hell of an offset now your first point was about the productivity of people in the workplace most of the workplace already is insured so this productivity effect you're talking about can only work through that small chunk of the workplace that is uninsured number one is that many sick days in a year even for those people there are some number three I'm not sure the Affordable Care Act will completely eliminate sick days for such people so you're only going to shave off a part of the sick days which is a small part of the year which is a small part of the overall workforce and you get a number in the direction you're talking about but it's pretty small we know how to add all this stuff up and that's definitely something we've brought in now the healthcare sector is probably going to boom other sectors that maybe boom boom is a little strong but grow but those are people moving from other sectors they're going to shrink and customers moving from other sectors you know when these resources the resources aren't coming from heaven as far as I know somebody's going to pay taxes or buy government bonds to pay for these subsidies they're going to pay for healthcare and they're not going to buy other stuff whether it be luxury hotels or new automobiles or what have you so that's kind of a shift it's a shift we kind of want to keep track of facing the national pie yeah I got there's one in the middle yeah we'll make this our last question you said redistribution a minute ago could you just say a few more words on that well there's one point of view that the rich people have too much money and the poor people don't have enough and we actually feel good when we redistribute like Robin Hood felt good about what he did and if you want to count that as a benefit okay count it as a benefit but let's not pretend the costs are zero the costs are there money from people earning above 400% of the poverty line to people below from people earning 350% of the poverty line down to people earning 200% of the poverty line for people who are uninsured toward people who already have insurance redistribution is kind of the flip side of all these economic forces that when you you're going to incentivize people not to work one benefit is you're going to be helping people who aren't working and vice versa I want to thank thank you so much thank you so much


Ha, ha, ha, ha We are laughing now When did you start your TikTok account? Why are you shouting at me? I just want to see something I have no zero consistency Zero He was among the first people I need a new phone When TikTok was the other name The first name for TikTok was It had a funny name before it changed to TikTok Trilla Rajiz was there And he still has 20 followers And she started in December She has 50,000 Now the question is, ask yourself Umono jyongilele Now that you've come to violence Speak to us So you were playing social Okay, one thing I remember I was actually telling this story The first time we met With Clara We were at a house And she was among the few people Who actually brought her present Like she came with a drink You have manners I've never forgotten that Eat your food You're the one who's come to my home Instead of assisting, you're coming to finish Volunteer will come and ask what's in the fridge Masai That was fun So much fun We danced salsa and bachata So you danced bachata on your TikTok But I danced as well I did The kambili I danced as well We know your song Masai I'm a very good dancer Masai we know your one song I'm a witness She's a witness Masai has come from fa He's also a professional dancer He doesn't like to talk about it But when he decides We sit down And let him dance We leave the flow for him When you hear that bear It means it's time for social break The class has been good It's time we go outside and play a little bit Now the game we have It's not familiar with Clara You'll never know if I've said it Because the correcto yama ni memo Mimindo ni kuna yoshi We'll see where we continue So the game is called Two Truths and a Lie But I know you'll have to switch it up And call it Two Lies and a Truth Two lies and a truth Can I fix that thinking about it now? Yes please start thinking So the rule of the game is that You're going to tell us two lies And one truth And then the rest of the gym is going to figure out One is the truth And which one are the two lies Ready? You're not starting yet? Yes of course I'm going to start Let me think I've been to Kisumu more than twice Let me stick with traveling I've been to Samburu You're making it hard now What else? I've been to Magadi You know Kisumu, Samburu and Magadi I don't know Magadi Okay let me choose another one That's fine You can keep it I feel like that's also a part of a lie If you have to look for another one Remember you're looking for the truth I've been to Samburu I've been to Magadi I've been to Kisumu more than twice I only know once you've gone to Kisumu I don't know if you went back I'm going to the truth of Samburu Not stating Okay I'm saying the truth is Magadi Magadi Because you don't know Magadi Because you wanted to change it I want to learn more about it Bazu Magadi Magadi You guys can't figure out that I've gone to Samburu I've gone to Kisumu once I've never been to Magadi The story is that I was going to Magadi That I was going to Magadi It actually stopped on the way I reached at a point in Gong Hills And then we saw There was a restaurant somewhere Where they roast meat So we stopped there I went there We sat down It's five There's no need to go to Magadi Let's go back But I've been to Samburu a couple of times Next Rajiz I'm 58 kilograms Okay I've gone to Mads Okay Piki piki piki I was going to Magadi I hate alimonings Alimonings Alimonings is the truth I thought Rajiz was going to go to Kufu Can you just imagine? No, it doesn't make sense He hates alimonings Actually he does hate alimonings He's a DJ Alimonings is a job So why would you tell him to wake up at 7 And he's just slept at 3 He hates alimonings We can't find him before 12 We've tried once Or twice Panicking We didn't go and looking for him We had it when we went to Kufu We went to Samburu I'm going to go with Val I feel like she knows Okay Would you like to go next? Sure Okay I've almost been attacked by a jagwa On a jungle I have slept two nights in a desert And I've been to the Barcelona stadium You've been to the Barcelona stadium That's the truth But that jagwa story sounded Almost convincing Jagwa? Siji Siji jagwa MP I don't know We have a member of parliament He goes by artist jagwa Wow Okay, so Barcelona Because technically you are from Spain So stadium is correct No guys Tell me Siji jagwa I know it I knew it You lied to me All of you Oh my God It was probably the most frightening thing I've ever gone through in my life What happened?  Twenty years old I cannot run to save my life No, I'm just nodding I've gone on several hikes Like nime panda mili makada Okay, I'll say the hikes is the truth That's really difficult Not to have ever done a hike on real life I'm going with a hike She doesn't run I'm not sure if I can run You're looking for the truth So what's the truth?  From Chagwa to chicken Have you ever been chased by a donkey? Have you ever been chased by a cow? Wait Cow will wait Uyo na chunganga hengombi For a living Me nana koku You've been chased by a chicken But you've told us to wait What are we waiting for? Nasi, I was waiting for him to answer Okay To make wana What do you think is true? Chicken, donkey, cow Okay, chased Like they're just walking next to you Or like they're really chasing you No, they chased me I was literally running for my life Okay, the chicken So what's the chicken? You see Kanot basa e kanot biches baya Cow He's chill Why not?  Kanot That's just your turn again Banyu mix broken tomorrow You ever? Banyu mix broken tomorrow I'm trying to remember if you mentioned it somewhere I was A club yesterday But a club means you were mixing somewhere Or you were just inside? Just party mood At Solicona dance Juyave wo Can I retire that? And I sweat We already have the answer That's a lie Ah Bili kia teka maali Amakia teka maali Eh, bata na ka Anything is possible That's what I'm saying Ah, I've remembered Amakia teka Anything is possible Anything is possible The truth Me yae I'm Kenyan Mixtape na drop care I But aneza kwa kula baki support But I don't imagine Just doing nothing in a club For a few hours I'm going with the mix dropping tomorrow The mix Mi am going with the street kitchen thing Wata na mini ka na club Mi siyezi imagine But siya oni kama Mixtape ngeshwo Shatwanza kutwambia From the beningi You'd have been telling us Himopatia kluwa jeskia Jeskia umisema The truth is a mix dropping tomorrow There's a mix Wait, wait See what I mean I was there and he wasn't When we came for the show He literally told me Masai Yesterday I was at Nairobi street kitchen That was last Last last The other day What's the mix about? It will be a live mixtape Tomorrow at Ya, almost forgot Tomorrow at Wama Africa, Leventown I love me second edition Going down Organizers Dan Sharks Chikiko Ruka Will be there And among others Among other influencers Will be there Na yoma piyata kuwa Other TikTok stars And dance instructors So what's up with the dance? I was like something You might want to go on Sissini TikTok Tomorrow at Wama Leventown We have a plan We call it a form We have a form So we will be doing something special On stage kiyashu For the first time Since 1998 Okay Wow Wala Abu just express yourself a little bit more So what's happening? You're going to be mixing while they dance I'll be the DJ And a lot more So come find the DJ How do you want to do? What is it? Stop speaking in 0.01 Okay A lot more As long as you've gotten an invite We are good You're bringing Barbados To Kenya now Chikiko Ruka Alright Barbado That thing Yes, he's bringing that At Nini master There's something happening over here Okay So I think time is running away from us a little bit So we might have to cut the came Yes, the came Thank you Thank you that we can say you came For Rajizu's event tomorrow In advance It's not an image of court So we are going to read a couple of Tell us what experience you've ever had going out That was either weird or really good And you'll never forgive Going out Like in a party I once Ended up sleeping in a boat Wow Yeah I was on a festival Music festival It was near a port And there was like an Airbnb boat And I remember it waking up like What am I doing? Yeah That's a good experience Wait Is that our last experience We have a good experience No, it was a good experience I mean I didn't have to go all the way home To sleep So it was nice Imagine waking up in Mombasa in Naiach I don't live in Mombasa No, you're in Nairobi Wee Wee Wee Okay, so that's what we're asking Experiences where we can share We have NMK It says hashtag social Friday Wale wami on doko Keeping a positive vibe From a 237 Zeka We see John Gadumbi He says We have John Gadumbi He says It's my birthday Please, Val, name it Wee Happy birthday to you Happy birthday, John Love is rage I remember playing truth or dare game with my friends And they dared me to go home Akis Jarekawa Wee That's my day That was the day of the violation Push King Brio says Kupigishwa shere na pesayango Asbun kiamka na pewa 20 bob Wee Aisha Abdo says Hey, the show is lit Masaina Rajess Mumewe Love ya, guys We love you too, Aisha Peter Pan says Kusip Nzinga then Nikandani kajikutani me lalabathrum What did you sip? And how big was that sip? Okay, TKEs Ni lewan kakata kulipa transport Sayi siname no Ah Oko jaba Ah Guys, you have to translate time for me Kuna ali lewa kashina kulipa He got drunk, Allah for He was unable to pay his way home A bitri na he doesn't have teeth Sayi nalisa says Hashtag shumare wee We have moods Ma zamval na ma silat kuna muzi We're very energetic Say hi to Rajess Adige Allah for You want the t-shirts Kupatia ni ma attend Anyway, mi experience na petia Ni kipiga shere he Shere is going for parties I know Kwa shi no shere Nili tere msa kama nyo e somo Drank a lot, bila kujwa Had a long way to go So time ya kwenda home Kusimama ni kashindwa we So my friends had to carry me to my house But at least you got home Yes, you have friends that care for you Kwewa Inglisia USA nili yongia bohana Pomba kwe li na pen They say alcohol comes with A little bit of English at the bottom So the more you drink, the more you start speaking English DJ Friary says Hai, ma say Pulaia maisha You don't live poli poli men Felo Mim Lord Francis the Twirly Eves and 98 Others Wao But the oven says Pwa sana bro, lenda kawera Ametkwe kapo kaforo We see you feeling Friday-ish Toda Keth says Big shout out Friary says Nikiwa kwa truthenda Nasujiku dance Akimemi So you don't have to dance Please pangavi lenda kum Amas pokenwaatis Inga inbo Ilesmasha Lanet Filiip Toto Achana Naion Lenda Kawesis Fireboy Zuchu Steezy Hashtag Sushu Friday Thank you baby Mimina kumbokan piga So says manzakwe da raka So achatunisame Gina Alex Kasina I see you Steezy with a selfie double tap I see you and we appreciate you for social knakers Hashtag Sushu Friday And there we are again On Twitter Kuna pichajkwa chme tiga by the way But we could not post it because Siji uatu alikwa na taftani ni Go to Val's Instagram I'm not posting it either See we had agreed this piece We had already We didn't talk We gotta leave, we gotta go now Please remind us your social media handle so we can follow you and support you Yes It's glada.ruis Which is R U I Z 6 It's also on the t-shirt Hey do like that Masai once more And then Raji is again with Reminding us starting from DJ Max Where is he going to be today And again what you're doing tomorrow So today we have some people who are with DJ Max Happening Not just what we do to influence boys Tomorrow we are going to be under Wama And we are going to be in Bado For the love of me, second edition Kuchii Kuruka, Tedan Shaz Dantgenero Ayoma We are going to do a bonus But we are going to start We are going to start Then later on we are going to speak This what night life with BZ, Delma, Tiga Happening here with them In the later time We wish a very great person And Kuchii Kuruka happy birthday Happy birthday Kuchii Kuruka Happy birthday She is very supportive So, happy birthday Kiki I want to be fair I want to be fair Mesa'i, don't trust me At Mesa'i KT on every social media platform That is Instagram, TikTok and everywhere Always a pleasure being with you guys Kumbukê just because social Friday is over Does not mean you should not keep watching Y2F4, we have so much content You really don't want to miss it But in the meantime We have started your weekend We are free to release you Please be safe Hai, shiyu


Hey everybody today we're making chicken kachatory in a stockpot on the stove and it's very simple it's got a lot of delicious ingredients and you're going to love it. I'm rockin robin and I'm going to show you how to make it right after my chef joke. What did the hot dog say to his friend who caught up to him and passed him in a race? Wow I relish the fact that you mustered the strength to catch up with me. Here's the chicken we're using some organic chicken thighs that are boneless and skinless. We're going to add a coating to this of some flour. I'm using Bob's Red Mill one-to-one baking flour but any flour will work and we're going to season it up with a little salt and garlic powder. Give that a stir to mix everything in and now we can start coating our chicken.  I'm going to go ahead and coat each piece and you know what this is going to do when you're making your dish is this flour addition is is going to thicken up your sauce. Now to mention season up the chicken a bit. Before we brown up these thighs though we're going to prepare some onions, mushrooms and bell peppers. You really want a nice super fine dice like I have here for all these vegetables. These are the mushrooms and these are the bell peppers. I wanted to mention something about fruits and vegetables when you buy them at the grocery store. You can always verify that they're organic by looking at the sticker and you see the number here it needs to start with the nine. If it starts with the number four then it's conventional and if it starts with the number eight it is GMO. We're also going to add to this some nicely minced garlic so a press seems to work the best.  All right we're ready to brown up our chicken. I've got a large cast iron pan here over medium-high heat and I'm adding some olive oil to this. As this gets hot give it a swirl. Swirl that oil all around so you coat the bottom of the pan. When it just starts to smoke go ahead and lay a thigh in there away from yourself. Once you get all the pieces in the pan just let them sit and cook. We're just searing this for like four minutes and then we'll flip them over. This does spatter a bit so feel free to use a grease guard. They work great.  These are done now so I'll put them in the pot and then we'll cook up the second batch. Once you're done cooking the chicken you're going to notice a lot of bits left in the bottom of your pan and you would like that because that's going to give your dish a lot of flavor. So I'm adding a little more olive oil to this because the mushrooms really absorb it. So what I'm going to do here is add the onions, the mushrooms, and the bell peppers. I'm going to saute this for about 10 minutes stirring frequently. During that last minute of cooking go ahead and add the garlic. Cook this for one minute and then we're going to add this whole mixture to the chicken. With that garlic in there this smells so delicious.  Next is some white wine, some sauvignon blanc, and don't forget you can get the written recipe below the video in the description. Next is a little bit of brandy, some tomato paste. Here are the spices I'm using in this. First in is the marjoram. Here's the dried thyme and some salt of course to bring out the flavor. And last but not least is our bay leaf. I'll give that a stir the best I can and then we're going to bring this to a boil. Once we get that to a nice little boil we're going to lower the heat cover it and cook it for one hour. When the chicken catchatory is about done you're going to want to serve this over something like pasta or rice or today I'm using polenta. This is already cooked so it's very easy to prepare. All we have to do is slice it up and then I'm going to heat up my cast iron pan, add a little olive oil and butter and we're going to fry this up and what we're going to end up with is a nice crispy edge and nice and creamy on the inside. You're going to love this. I'm going to cook these three or four minutes per side and take them out place them onto a paper towel covered sheet just to absorb some of the oil and they're ready to go. Here's how I serve this up.  Oh and there's one final touch. I've got some basil leaves here and I'm chopping it up and we drizzle that right over the top. I don't know about you but I get hungry every time I watch this. If you'd like to have a delicious dessert to go along with your chicken catchatory then try my chocolate pudding fluff. Click the link on the screen and it'll take you right to it. It's delicious. I hope you enjoyed today's video. If you did let me know by smashing the old like button and leave me a comment of course. I always love to hear from you. All right we'll see you back here next week for another delicious and healthy recipe.