Robert Reich tells us that, as consumers, we should be able to shop anywhere we want, but as citizens the results should bother us. His solution: as business owners, we should be told how much our employees should be paid in wages and benefits. I interpret this to mean that he thinks we need to become Sweden, a.k.a. the land of incredibly expensive consumer goods.
This, in essence, is what Reich recently opined in The New York Times. He writes that WM is bad because we don't use legislation to force it to be good.:
We can blame big corporations, but we're mostly making this bargain with ourselves. The easier it is for us to get great deals, the stronger the downward pressure on wages and benefits. Last year, the real wages of hourly workers, who make up about 80 percent of the work force, actually dropped for the first time in more than a decade; hourly workers' health and pension benefits are in free fall. The easier it is for us to find better professional services, the harder professionals have to hustle to attract and keep clients. The more efficiently we can summon products from anywhere on the globe, the more stress we put on our own communities.I expect better from Reich; I don't know why. I expect empirical economics--not advocacy dressed up as such.
I get the feeling that Reich is in a restrained crisis mode.
The only way for the workers or citizens in us to trump the consumers in us is through laws and regulations that make our purchases a social choice as well as a personal one. A requirement that companies with more than 50 employees offer their workers affordable health insurance, for example, might increase slightly the price of their goods and services.Actually, Reich's "social choice" is not my "social choice"; he's pretending that there is only one "social choice"--one good thing we can do with redistribution. I emphatically disagree; in fact, that's just silly.. I believe that my "personal choce" is a "social choice", even if Reich disagrees: I want to spend my own income where I damn well please, and that's NOT in places where I am guaranteed to make the poorest Americans even richer than people in China, Russia, India and the Maldives.
Put another way, insisting that WM's prices are lower than social cost is no more convincing to me than me insisting that WM's prices are much higher than social cost. I can't measure "social cost", and neither can Reich. Even if I could measure something like or near "social cost", I would be measuring the distance from the current economy to my own vision of the just society, which is far more libertarian than Reich's vision. Since the notion of "social cost" is normative and affects every human activity, it can easily be used to justify a set of laws and institions that details how everyone must behave.
Also, Reich seems to know that a "small" price increase will be the effect of unwritten but almost certainly vague legislation on the operations of a complex retail sector. Just how did he get this info??? Certainly not economic theory, which makes no quantitative prediction.
Reich knows that tax legislation made specific benefits not subject to income taxation if employers provided them; since WWII, this above all else, has created the expectation by employees that their employers pay for health insurance. However, there is little reason to expect employers to be experts in the purchase of health care, and the only way for employers to control or restrict the costs imposed by their employees on the insurance companies is to share those costs with the employees. I'd like to know why doesn't Reich discuss further tinkering with an already interventionist tax code. Without using subsidies and pretending, the only way to lower insurance prices is to lower healthcare costs, and the only ways to lower costs are productivity enhancements and smarter healthcare usage. People must be made to bear more of the costs of their decisions; even if Reich thinks this unfair, he has little alternative... Why not adjust the tax code to fully separate employment from healthcare provision by incentivizing individual purchase and control over healthcare plans?
I'd like the government to offer wage insurance to ease the pain of sudden losses of pay. And I'd support labor standards that make trade agreements a bit more fair.I'd like that "offer" of wage insurance to come from a nonprofit corporation, with rates that make the organization solvent; and I insist that having such insurance be completely voluntary. However, I think that Reich has a compulsory income transfer in mind, not an insurance program. Also, I'd support "labor standards" only if they are explicitly temporary AND are tied to permanent elimiation of tarriffs. And for Reich to call labor standards "fair" is just nationalistic moral posturing. I don't think workers in China will belive it "fair" if labor standards -- wage and hour controls -- prevent them from moving to the cities from the farms. They will not think it "fair" that workers losing their jobs in the U.S. due to rapid change will still have far better standards of living than them.
A) Real wages: Down 0.4% in 2004. But if all the pressures Reich claims are so dangerous (though not new), why have real wages increased 9 out of the last 10 years? 9/10 is not a problem, and I think Reich knows this, but cited the data because it can feel scary.
Also, I find it implausible that Reich doesn't know that the BLS does NOT include price decreases due to the proliferation of WM Supercenters, and including them would probably mean real wages are about unchanged.
B) Real health benefits: (These data are from the BLS. You can look them up yourself.)
Series ID : EBUMEDINC00000APTitle : Percent Of All Workers Participating In Medical Care Benefits
Type : All Private IndustryYear Ann
1999 53
2000 52
2001 No data available for this year.
2002 No data available for this year.
2003 53(D)
2004 53
So we see workers participating at about the same rate over the last 5 years. However, the amount they're paying is really going up:
Series ID : EBUFAMAVE00000AP (A)Title : Average Employee Contribution For Family Coverage Medical Care Benefits
Type : All Private Industry
Year A : Average monthly premium
1999 169.84
2000 179.75
2001 No data available for this year.
2002 No data available for this year.
2003 228.98
2004 264.59
And more individuals have to kick in a share for their plans:
Series ID : EBUSELFCONTRIBAPTitle : Percent Of All Employees With Medical Care Required To Contribute Toward Cost Of Single Coverage
Type : All Private IndustryYear Ann
1999 67
2000 68
2001 No data available for this year.
2002 No data available for this year.
2003 78
2004 76
But is the amount paid by the employer decreasing? Uh, no. Here are the Q4 to Q4 percent changes in the healthcare benefit cost per hour for private industry
Year Yr/Yr Q4Bottom line: Healthcare is getting more expensive, insurance prices are rising, and companies are giving compensation increases in the form of paying for health insurance, which is not income taxable.
2000 8.5
2001 9.2
2002 10.2
2003 10.5
2004 7.3
See also the Eclectic Econoclast's comments:
How do our purchases from Wal-Mart become choices that necessarily lead to gubmnt intervention? Why is there some need to "trump the consumers in us ... through laws and regulations...?"
Posted by Kevin on February, 28 2005 at 10:08 AM
