Sunday, October 21, 2007

Zero Sum Game

As the debate goes on in California (and other areas where mandated health insurance is on the table) the question that is never posed is this. Who pays?

"employers don't really pay for health care now, and they won't be paying for it no matter what kind of new law the state passes. We, as workers, pay for our own health care, and if more people understood this fact, the debate over the issue would probably play out in an entirely different fashion."

Is the public really that misinformed?

ultimately, employers roll health insurance premiums into a package with wages, retirement benefits and any other costs associated with hiring an employee. The employer considers the entire amount to be the cost of each additional worker.

Why is this so hard to grasp?

Consider a company that provides no insurance now and pays its employees $10 an hour. Suppose the state tells that company it must spend 75 cents an hour (7.5 percent of payroll) on health care for that worker. The worker's labor is still worth $10 an hour to that firm, just as it was before the state passed its law.

The worker has not suddenly become more productive, warranting a pay raise. Several possible scenarios include:

fewer hours worked (a cutback)

fewer employees (layoff)

impact on future wages (smaller raises)

"Employers have to pay their fair share of the cost of health care insurance," Assembly Speaker Fabian Núñez said last week. "You cannot let employers off the hook."

Which leads us to this . . .

Núñez can posture all he likes about sticking it to business. But, ultimately, it is the workers he claims to represent who will be paying the price.

A zero sum game.
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