Health Benefits Are Part of Worker Pay
Posted October 14th, 2008 at 2:55pm in Health Care 
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George Mason University economics professor Don Boudreaux writes a letter to The Washington Post correcting columnist E.J. Dionne’s mistaken defense of Barack Obama’s health care plan:
According to E.J. Dionne, “Few investments would help businesses more than offloading a share of their health-care costs to the government. It’s social justice with an economic kick” (“Hoover vs. Roosevelt?” October 10). Overlooking the questionable “justice” of forcing Peter to pay Paul’s insurance premiums, Mr. Dionne’s economics is wrong.
Government provision of universal health insurance won’t reduce employers’ costs of employing workers. Worker pay – wages and benefits – is set by competition among employers for employees. If competition obliges Acme Inc. to pay a worker an hourly wage of $20 plus health benefits worth $5 hourly, this fact means that Acme must pay this worker a total-compensation package of $25 per hour. Because government provision of all health insurance would not reduce the value of this worker to Acme and other potential employers, competition would oblige Acme to raise the worker’s hourly wage by $5 – the amount that Acme no longer must pay for health-insurance premiums. Acme would still have to pay this worker a total-compensation package worth $25 per hour.
Contrary to Mr. Dionne’s assumption, government provision of universal health insurance would not reduce firms’ costs — although it would surely raise their taxes.
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2 Responses to “Health Benefits Are Part of Worker Pay”
Gene Laabs on October 14th, 2008 at 2:55pm said:
In addition to the certainty of increased taxes on the firm is the increase in prices to the consumer of the firms product or service. All firms (business’)pass their tax burden to customers in their prices. Any talk about increasing Corp. taxes by politicians is nothing more then a scam! That or they don’t know enough to be trusted with public office!!
Mike, Cleveland, OH. on October 14th, 2008 at 2:55pm said:
While I agree with professor Boudreaux’s general thesis, I am not sure that the value of the worker (as discerned by the worker) is the $25.00 per your example. The cost of the worker to the company is the sum of all costs, i.e., wages + benefits; however the laborer see his value as the hourly wage, less deductions for taxes, insur., etc…
Having said that, it is unrealistic to believe that burden can be eliminated for the cost of insurance. One of the immutable physical laws is: matter can not be created or destroyed… by that I mean cost is cost and it does not simply disappear by moving to another column on a ledger. The cost of insurance is a cost period. Whether it is paid by individual, company, or gov’t, it is a cost, and truly can not be hidden. Ultimately, this cost is on the company,and then the individual (whether labor or consumer).