Wednesday, November 16, 2016

Healthcare and Employment in the US

I've been reading Dean Baker's free available book "Rigged: How Globalization and the Rules of the Modern Economy Were Structured to Make the Rich Richer".

In the US, it is common for employers to offer their employees healthcare as a benefit. But this disincentivizes employers from hiring more workers and causes them to squeeze as many hours as possible from each worker, since each worker has a fixed cost to the company. He writes:
Specifically, because health care insurance is mostly an employment-based benefit, rather than universally provided through the government, employers typically see it as a fixed cost per worker. So rather than hiring additional workers and paying for their health insurance, employers would generally prefer their existing workforce to work more hours. The preference for longer hours is even greater in cases where employers provide defined benefit pensions in addition to health insurance.  
Of course, the pattern of providing health insurance and pensions as employer-provided benefits was the result of government tax and regulatory policy that favored employer-based benefits. The result was a pattern of employment in which better-paying jobs are more restricted in number than would have otherwise been the case. Consider this basic arithmetic: if we produced the same number of cars but the average work year in the auto industry had 20 percent fewer hours, we would have 25 percent more people working in the auto industry. The reality will always be more complicated, but the basic point is straightforward: for the same levels of output, shorter hours mean more workers.
It is a provocative argument, to say the least.

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