In an earlier post, I asked whether there is something about compensating workers with in-kind benefits -- health-care insurance, in particular -- that makes that form of payment qualitatively different from explicit wage payments, from an employer's point of view. My musings were prompted by this passage from SmartMoney.com:
Many economists attribute the slow pace of hiring during recovery from the last recession in part to the rapid growth of benefits, especially health insurance.
My response at the time:
I'm not convinced that last sentence should be taken at face value. After all, from an employer's point of view all that should matter is the total cost of labor, not the form in which payment is made. The difference, of course, might be that payments in the form of health care benefits are more open-ended and "sticky" than payments in wages. If that's so, perhaps its a wrinkle in this debate (with follow-ups here and here) that deserves some consideration.
So this, from an article in this morning's New York Times, caught my eye.
It's no secret that surging health costs have become a C.E.O.-level issue. When a company like General Motors looks more each year like a giant health plan that operates a nice little nonprofit car business on the side, who wouldn't sound the alarm?
But to many business leaders, their union counterparts' view of soaring health costs remains a mystery. Given union readiness to strike in the face of even modest efforts to slim generous health plans, these costs almost certainly doom unionized workers to few if any real wage increases for years to come. Do union leaders get this trade-off? Are they hamstrung by political dynamics that make it hard to approve even sensible health plan changes that can be cast as "givebacks"? And what is their answer?
Recent conversations with Morton Bahr of the Communications Workers of America and Andrew Stern of the Service Employees International Union suggest that at least some union leaders think about the health system in ways more sophisticated and businesslike than many chief executives do - and that they are eager to be partners in a national reform dialogue that's overdue.
"There's really one economic pot, and you argue essentially over the size of that economic pot and how it gets distributed," Mr. Bahr said of the growing trade-off between health care and wages. "What it leads to is more strife at the bargaining table because workers are not going to be ready to say, 'Well, the health care costs are going up, so we're willing to take a zero wage increase.' They expect the union to find a way to do it, and that's going to lead to more strikes."
Any thoughts?
UPDATE: John Irons and Russ Roberts discuss the issue of employer-provided insurance (among other things) in the latest issue of the Wall Street Journal's Econoblog.