Today's Opinions, Tomorrow's Reality
Worse than Worthless
By David G. Young
Washington, DC, October 25, 2005 --
With thousands of job cuts at auto part manufacturer Delphi and thousands more likely at sickly General Motors and Ford, the auto industry is providing the first hint of the next wave of the decline of America's working class. The problem at the auto companies is shared by many industries employing low-skilled labor. The skyrocketing cost of employer-provided health care has made such employees increasingly expensive to corporations, even as salaries have remained stagnant. In 2003 American's per person spending on health care was 6.3 times what it was back in 1960.1,2 Last year, GM alone spent $5.2 billion insuring employees, retirees and their families.3
An agreement last week between GM and the United Auto Workers will shift a small amount of health care costs to employees and pensioners. Ultimately, however, the rigid, unionized structure of America's auto industry will give GM and other industrial companies little alternative to massive job and pension cuts to ease the burden of paying for workers unable to produce as much as they earn. If GM could jettison its health care liabilities, it says, it could trim $1,500 from the cost of every car it sells.4 As health care costs increase, the cost of employer provided insurance has begun to rival the entire value generated by low-skilled employees -- even if there were somehow to agree to work for no salary at all.
Thus, we've seen the slow rise of employers who reject America's unofficial but sacred system of employer-provided health care for full-time employees. Wal-Mart, America's largest employer, has drawn the ire of egalitarians for hiring employees at part-time status in order to delay or deny giving them expensive health benefits.
In the cold-hearted world of business, the inability of low-skilled employees to generate value above the expensive cost of health benefits thoroughly trumps social responsibility. If required to pay such expensive benefits, low-skilled employees are worse than worthless to Wal-Mart -- they actually become liabilities. It should be no surprise, therefore, that the company seeks to avoid paying for employees' health care.
Such practices are deeply offensive to Americans, and not just to those on the political left. America has always had a tradition (imperfect as it is) of priding itself as a relatively classless society. Equal access to doctors, medicine, and treatments is closely associated with this egalitarian outlook.
While it has always been acceptable to Americans that some people have bigger houses, fancier cars, and flashier possessions than others, general access to the basic necessities of life, including health care, has long been a core American value. As health care costs rise, that value looks increasingly unsustainable.
Back in 1960, when the industrial age was still near its apex, health care spending was a measly $900 per person in current dollars.5 It wasn't too expensive to provide universal access to medical services when doctors did little more than give you an aspirin, cut out your appendix, or set a broken limb. But the increasing wealth of America's professional classes has pushed the medical industry far past what it was in 1960. Back then, a retiring 65-year-old could expect to live only 14 more years. In 2002, that had grown by 25 percent to 18 years.6
All the new drugs, medical procedures, and devices that give Americans these extra years have been produced only by the work of millions of highly skilled and highly paid professionals. Such expenses, in a modern market economy, simply cannot be paid for with the wages of manual labor, made increasingly cheap by advances in technology, transportation and free trade.
If the economy -- as expected -- continues to assign ever-more value to brain power vs. muscle power, the majority of Americans with average or below IQs will continue to be left behind economically. Unable to generate enough wealth to pay for the expensive new life-saving drugs, devices and procedures that could one day add a year or twenty to their lives, providing for them will be up to a wealthy minority.
The $10,000 question, of course, is this: Will this minority submit to paying for everyone else? Government spending on Medicare and Medicaid has already ballooned from $12.5 billion per year in 1970 to $564.8 billion last year.7,8 This trend could easily continue until taxing a wealthy minority to provide health care funds for the dependent masses is the primary role of the U.S. Government.
If America is to keep its sacred tenet of equal access to health care, this is what is necessary. But doing so conflicts with another core American value: self-sufficiency. America cannot hold on to this value if most people become little more than wards of the state, living off the labors of an elite minority. But given the growing incompatibility between these two core values, one or the other is going to eventually have to give.
1. U.S. Dept. of Health and Human Services, Effects of Health Care Spending on the U.S. Economy, February 25, 2005
2. Bureau of Labor Statistics, Consumer Price Index Calculator, As Posted October 24, 2005 ($143 in 1960 is $889 in 2003 dollars)
3. Washington Post, GM's UAW Retirees Face Health Care Costs, October 21, 2005
5. HHS, Ibid.
6. U.S. Center For Disease Control, Health, United States, 2004.
7. Center For Medicare and Medicaid Services, Annual Report of the Boards of Trustees of the Federal Hospital Insurance and Federal Supplementary Medical Insurance Trust Funds, March 23, 2005. (Medicare: $5 billion in 1970, $280.8 billion in 2003)
8. Alliance for Health Reform, Sourcebook for Journalists 2004, September 2004 (Medicaid: $5 billion in 1970, $284 billion in 2003)