One of the myriad justifications for the passage of the PPACA, and subsequent defenses of going even further (e.g. government paying for all of our health insurance) is that by taking the burden of firms providing health insurance premiums to their workers, it will make firms more internationally competitive. Long ago, we discussed how the premise here is in fact faulty. Why? Firms’ total compensation is what matters for international competitiveness (in this simple mental model, which I argue is not right). Whether a firm pays $10 per hour in wages and $6 per hour in health insurance benefits is no different than if they provide $16 in wages. And we know that labor market competition implies that if firms did not “have” to offer health insurance, wages would quickly be bid up to “compensate for it.” So the entire discussion of international competitiveness is a red-herring for socializing health insurance.
Fine. But that is not what I want to point out today.
Think instead of what the underlying mental model is for such justifications. The conventional (incorrect) view is that American labor costs determine American competitiveness. And then what folks who support single-payer on these grounds must be assuming is that by having the government provide health insurance, firms DO NOT have to pay their workers as much. So while it is plausible that overall the combination of government insurance plus worker wages leaves workers no worse off, the point of this policy is to encourage and celebrate the reduction of worker compensation packages.
Doesn’t this seem odd given the widespread support and rhetoric surrounding the minimum wage? Have you heard someone who supports the minimum wage argue that it won’t impact American competitiveness? Or that it will? Even if workers are not fired, surely profits will fall, or prices will rise, even if by a little bit, which means that in a brutal international marketplace, American firms are worse off. My point is not to verify the veracity of these claims, but again to point out that it is awkard to believe deeply in increasing the minimum wage and at the same time advocate single-payer government health insurance, particularly if the justification for single-payer is international competitiveness.
Of course, where output gets produced has almost nothing to do with worker wages or even compensation, but I wouldn’t want to bore folks now with discussing why. As a hint, if the absolute level of low wages and compensation were the driver of production decisions, then how come all global manufacturing isn’t in the Ivory Coast, or why isn’t every American job in Mississippi?