Big business CEO: Hey our benefits costs will go down now that we have UHC. Yippee!!!
CEO secretary: Boss, you have 2,000 messages on your email.
BB CEO: Say what.
CEO sec: All of our employees are wondering when the pay raises are coming to make up for the benefit cuts.
CEO: Uh oh…
CEO sec: The more financial astute of our employees are suggesting that the pay raise needs to be greater than the benefit cut, since the pay raise is taxed while the benefits are not.
CEO: egad, our payroll taxes will go up too. On top of the increase, to pay for the UHC. Hey, I thought all the employees tossed out that pamphlet we sent last year touting the value of our benefits.
CEO sec: Apparently not, also I have the union VP on line one, shall I put him through.
CEO: what floor are we on.
sec: the 23rd sir…
CEO: that is too high to jump isn’t it…
Our company has good benefits, especially for a small company. In the long run, UHC will end up costing the company more, for lower benefits, and reduce the number of ways we can effectively compete for skilled employees.
When I worked for a big company not long ago, I had a great Dental Plan that paid something like 90% of any Dental care I had. Whenever my Dentist said he wanted to to “x”, I said sure, go ahead. Sounds good to me. I’m self-employed now and my Dental Plan isn’t so good*, and when my Dentist says he wants to do “y”, I say let me do some research first. There have been several times when I’ve declined “y”, and my research told me it didn’t make one bit of difference. Previously, I had little incentive to do my own research.
Tying Healthcare Insurance to your employee is absurd, and is only due to an historical accident. During WWII, there was a labor shortage but there was also wage and price controls. In order to attract employees, employers had to offer benefits, like health insurance. The practice stuck, and now we’re stuck with it.
The vast majority of Americans can afford their own Healthcare Insurance, just like most Americans can afford their own Car Insurance. Imagine the craziness if you had to requalify for car insurance everytime you changed jobs. We would be best served by disconnecting Healthcare Insurance from our employers entirely, and fund any subsidies we give to the truly needy thru the tax system. That way, the majority of Americans use the market to help control healthcare costs, and there wouldn’t be any talk of employers getting a “free ride” by not providing Healthcare Insurance.
Everyone needs food, but we don’t require employers to provide Supermarket Coupons to workers. That’s because there’s this amazing thing called “money” that employers can give to their employees so that they can use it for whatever they want-- food, cars, Big Screen TVs, even Healthcare Insurance.
*Note to self: look for a better Dental Plan in 2006!
That is an interesting scenario, But for a non-union shop I think it would play out more like this.
From the CEO:
… To all of our valuable employees.
With the introduction of UHC we can afford to give out raises, improved dental plans and eye glass plans. We are also all likely to see a large bonus this year.
Signed CEO.
Financial Picture if Health insurance was worth $3000 per employee, give a raise that works out to $1000 and spend $500 on increased benefits in other areas and give out a one time $1000 bonus and pocket the rest. Hooray for Big Business.
I believe that most places are not Union at this point, perhaps I am wrong.
Guess I was too subtle. Do you think the average employee would take a one time $1k raise (for which they are taxed) and a one-time $1k pay (for which they are taxed) and $500 benefit increase, in exchange for a $3k benefit cut (for which they are not taxed), will think that is great trade.
Notice this rearrangement takes resources away from actually doing thing to run the business for a profit.
You’ll have to pay the fat bonus you suggest to more than make up whatever you may save.
The CEO gets the union call when a few employees decide that trade doesn’t bring a smile to their face. Unions will love mandatory UHC.
Any company who has effectively negotiated a good benefit mechanism that they think helps attract employees will end up paying more for the same employees, with higher taxes to pay for the UHC. Why do you think they are not lining up for it?
No free lunch, if there was, the problem would be solved by now.
Ding Ding Ding Ding… We have a winner. If the State has a problem with Wal-Mart’s wage scale for part-timers then Wal-Mart will have to eliminate the problem or risk legal action.
On a completely different subject, anyone see those new self-checkout lanes popping up at retail stores? I wonder if they’re made in MD?
The Home Depots around here have them. The first few times they can be a bit tricky to use, but I always make a bee-line to them now. Hopefully, people will maintain their technophobia towards them so the lines stay short.
Of course they could just outsource the majority of their workforce to a couple of different temp firms. Bingo, Walmart is no longer an employer with greater than 10,000 employees. I specified multiple temp firms so they would not have enough employees to be required to shoulder the burden either.
Where is this “benefit cut” coming from? Under UHC, they’re still getting health coverage. They’re just getting it from someone else.
There’s reason to believe UHC is more efficient overall than employer-provided health insurance - medical care providers in the US have a ton of overhead just to deal with all the various types of insurance. The savings from not paying for health insurance would likely outweigh the increased taxes.
And of course they needn’t react immediately, either. Walmart certainly won’t open any new stores, and may phase the existing stores out over time. They’ve closed stores in Canada (at least one store) when they were required to unionize. I wouldn’t be surprised if they would considered it a good investment to shut down at least few stores to make sure other states get the message. You don’t want us? Fine, we’ll go where we’re wanted.
Bill and Hilary thought this as well. Made it a campaign issue, figured they could make the numbers work. Then after they got elected they had to take on the issue for real, making real estimates of actually what it would take. Remember the Health Care Task Force Hilary was in charge of.
The situation is even more expensive now after a few more years of double digit increases.
Big business won’t go for it, isnt to their benefit to subsidize smaller businesses.
Medical community won’t go for it, the current system is better for them. They have easily made up for the overhead you mention by jacking up rates. Since as John Mace points out, the market is not price constrained since the user has little incentive to price shop.
The companies that have went self insured won’t go for it (it was 65% of employers over 500 employees when we made the jump 5 years ago, probably higher now). What Mr2001’s post misses is that any UHC plan that isn’t way too expensive will be a benefit cut, and a significant one for any company that has provided above average benefits. The end result will be for my company to subsidize others who have worse demographics, and get less benefits. We will pay more in payroll taxes and increased make-up pay, the size of the numbers involved simply do not work any other way.
Drug companies won’t go for it, UHC will put in price constraints, less incentive for drug investment with lower potential ROI’s.
I’m not arguing against UHC, but suggesting that you can get it paid for without having it cost those who have made the current system work for them in some way is sheer fantasy.
Seems to me that big business has the highest health care costs. I’m sure you’ve seen headlines about, for example, GM desperately trying to spend less on health care.
The experience of other countries has not shown this to be true. They generally get the same quality of care that we do, but they pay less.
Of course. Any change has an negative impact on those who rely on the status quo, whether it’s a change in health care, pollution regulations, education, tax codes… doesn’t mean the overall result won’t be positive, though.
Err…the reason WalMart is successful is not because they ‘rely on the status quo’…the change Maryland is proposing will cause WalMart to actually do things other than merely bump up benefits.
Cut employees, shift part time to full time work.
Squeeze vendors, causing them to cut employees, benefits or both.
Cut pay to make the benefit % go up.
Revise hiring practices
Maryland is merely assuming WalMart will help fund the shortfall by passing this legislation. Pretty likely WalMart will pass most of this buck along to others, because they are likely going to be able to better adapt to change. Sure any change has a negative on someone, think that WalMart will not pass on most of the negative impact of the Maryland legislation to others is naive.
Nice end run, except for one thing; if Wal-Mart is paying near minimum wage, how can the temp agency add on a margin without increasing Wal-Mart’s payroll? They can’t pay them much less than they make now, they will bump up against the minimum wage law, and attract an even less qualified workforce. Not much of an opportunity for the temp agency, and if Wal-Mart’s payroll goes up a few percentage points for the same man hours, they might as well pay the 8% into health care.
It becomes an entirely different accounting format. The expense would no longer be counted as payroll. Walmart would also be able to eliminate many HR positions in the process. So it’s hard to put an exact number on what the hard & soft savings might be but a temp firm may be able to pay the same and still save Walmart money.
I’d say they probably have no idea what universal health care would end up costing, and when universal health care does come to this country, I believe it’ll be because companies like GM realized that having to pay for their employees’ health care themselves is making it hard to compete with foreign companies.
You’re right. I doubt this particular measure will have much success. The state trying to force companies to provide health insurance is a weak substitute for the state actually providing it on its own.
Just to throw in my 2 cents. I find WalMart’s reasons for not offering sufficient healthcare completely bullshit. One of the main reasons Starbucks is not on my boycott list is that their employee benefits are some of the best out there, especially for part-timers, which they define as 20+ hours per week. And the coffee industry is just as competitive as the overall retail industry.
Hopefully Starbucks will continue their benefits, yet I can see them favoring some major healthcare reform. Cite.
I think business made a major mistake in '93 not supporting the Clinton reforms. For that I blame the insurance industry more than any other though. But I don’t think anyone saw the dramatic rise in health costs over the last dozen years. And what may have made good sense then makes less and less sense now. If costs rise much higher, businesses will have to support UHC or similar measures since they will not be able to provide meaningful benefits at any level.
Health benefits were a strong competitive advantage when hiring, but as the article above shows, when the cost of benefits are higher than your cost of good sold, it begins to affect the core business. Instead of being a side issue, it becomes the main issue.
I have no problems with the law Maryland passed. WalMart lost any right to claim market interference long, long ago. They subvert the market by shifting as much of their costs onto others as much as inhumanly possible - whether it is their suppliers, their employees, or taxpayers. They have not participated in the free market for some time. That the taxpayers decide to shift some of those costs back to the firm(s) that incur them is fine by me.
On a side note, I present Vizcaino v. Microsoft. The current situation is not much better. A friend of mine is still a ‘contractor’ after three years of employment. His benefits are decent, but nowhere near those of true Microserfs.
That is a very good question. I cannot state what ‘specific’ market they are in. But they are certainly not in the ‘free market’.
The free market defined as: 1) Commerce is governed by the laws of supply and demand. Government interference and regulation are limited to defining property and contracts.
Walmart has no problem lobbying for government subsidies and tax breaks that help their business. They thus lose the right to complain that government regulations are unjust if it affects only them. They have constantly sought deals where the only firm affected by a subsidy would be them. No cites yet, but I am certain I can find one.
*2) The market consists of perfect competition, where no producer or consumer can influence prices. All firms are price takers.
*As soon as a firm reaches a certain size that they can dictate prices to their suppliers and can sell products for a loss to undermine others, they have left the free market (and the fair market). Microsoft is in this category as well as most Fortune 500 companies.
3)* Perfect information: “In economics, a state of perfect information is required for a completely free market to function. That is, assuming that all factors are rational and have perfect information, they will choose the best products, and the market will reward those who make the best products with higher sales. Perfect information would practically mean that all consumers know all things, about all products, at all times, and therefore always make the best decision regarding purchase.”* Granted almost no market meets these assumptions, but WalMart disguises the true costs of their merchandise by transferring costs to others. My rule of thumb is to double the price of any item at WalMart to realize its true price.
They demand prices from suppliers based on internal proprietary information. The knowledge of their own sales figures for different product lines is enough to skew the information in their favor. Granted, this is true for most businesses of any great size, and those businesses have also left the market behind. They are not basing their purchases on actual demand, but on their own knowledge of what markets they can create.
The best criticism I have read so far that depicts how large corporations do not follow the ‘rules’ of the market is The New Industrial State by John Kenneth Galbraith. It is the great joke of economic classes that to describe the free market system they have to rely on either financial or agricultural markets (which have their own set of subsidies to subvert prices). The professors know that modern business practice has nothing in common the free market model.
So again, I do not what specific market Walmart and the rest ‘compete’ in, but it is not the free market.
Here is a good place to begin - Warning - PDF And yes, this is pro-union.
“This report was funded in large part by the United Food and Commercial Workers
International Union.”
It does not mean the facts are incorrect.
“This brought the total number of subsidy deals we identified to 244. The total value of all the subsidies was $1.008 billion.” And these are only the deals they could actively identify.
