Jobs and the Health Insurance Blues

The United States is faced with a lack of jobs for people who are willing to work but are no longer economically viable. Demand around the world is starting to pick up and there is increasing manufacturing activity in Asia and Europe. However, while we see a small increase in this country, it is probably pure fantasy to believe that we will create anywhere near enough jobs to reduce our unemployment rate significantly in a structural way.

There may very well be some spurts in employment if we see the housing market hear up again (not desirable) or if we get smart enough to use our tax dollars to rebuild the country's infrastructure. However these measures are not going to restore the private sector manufacturing jobs we are losing to overseas competitors unless we address the fundamental affordability problem.

If you hire someone in the United States you are generally expected to provide a benefit package that includes health insurance, especially if you are a large company. This makes the cost of health insurance an economic factor in the hiring decision. In our competitors, health insurance is provided by the Government and whether it is better or worse, cheaper or more expensive, becomes a non-factor in the hiring decision.

I recently was reviewing numbers related to health insurance costs for the upcoming year and we find costs approaching $10,000 a year or greater for family coverage. Even requiring employees to pick up 25% of the premium leaves a cost of approximately $7,500 to be borne by the employer. This is of course on top of the payroll tax for social security and any pension cost, but let's just consider the implications of that $7,500 cost to the hiring of lower level employees (the ones having the most trouble finding jobs).

Suppose you want to operate a manufacturing or service business and have a choice about where to locate your primary production facility. If you locate it in the United States, you have to pay a competitive salary, let's put the entry level at $20,000. At that rate the real cost to you is that amount plus the payroll tax of about 7% and the cost of health insurance as well as any other benefits you offer. Now, $7,500 increases that cost by 37.5%.

Now suppose you compare that to a location such as England, or China. The amount that you have to pay in salary will vary of course but a lot of that variation may be offset by the logistical problems of dealing with their tax structures and cultural differences. However, the cost of health insurance can easily change the dynamics of that analysis, in favor of locating that job elsewhere.

Currently we see a reaction to the inadequate health reform bill that actually failed to address this very problem via some misguided belief that a National Health Insurance plan would be less effective. Of course that is debatable, and certainly under a National plan, some could buy supplemental plans anyway but those who bought into the idea that such a plan was anti-capitalist or socialist, are creating a situation that will create a permanent unemployable class that will be dependent on the Government for their very survival. Not sure what is more socialistic that that.

Making health insurance a marginal cost of employment instead of something paid for out of general taxation, is exporting jobs. Those unemployed who oppose a national health insurance plan have been fooled into doing the one thing that almost ensures they will become a permanent underclass. While you can't fool all of the people all of the time, you can fool some of the people most of the time.