A reader writes:
In Greg Mankiw’s blog-post about the impact of
health care costs for American businesses, there seems to be something missing in the equation. Unlike wages, the costs of health care are dictated by forces outside of the control of management for something like GM. As such, while admittedly workers would fight for higher wages in light of eliminating the burden of health care costs from the shoulders of their employers, the employer has the option of not giving those workers higher wages. These things are negotiated between management and labor. Health care costs, however, rising at rates far higher than that of wages, are outside of the control of management. The costs are dictated to management, which itself is made up of participants in health insurance programs.
This all boils down to the question of opportunity costs.
Economic choices are being forced upon businesses by the health care industry, rather than being the product of a genuinely free market. It’s the equivalent of saying that if a kid throws a baseball through your window, your economic situation is no worse than it would have had you not needed to replace the window, because in the end, your kids would have pressured you to buy them more expensive Christmas presents. By this standard, raising corporate taxes should have no impact either, because lower tax rates is simply more that can be demanded by labor.
The argument is kind of silly when you look at it closely. And it purports to be a market based analysis when it’s clearly ignoring key features of what makes up a free market.
The Dish 