Wednesday, April 20, 2005

The Eclectic Econoclast is on a roll
Snails, hate speech, and employer-paid health insurance

It will be worth your while to pay the Eclectic Econoclast a visit over the next few days. The 13 week Canadian semester is over and he's knee deep in grading papers. This has driven him into diversionary tactics as revealed by greater output and profundity in his blog.

I've already linked to several of his posts, but the hits just keep coming. A sampler:

1. A relection on snails, Bosnia, factor prices and endowments.

2. If I quote something you said, is that "hate speech"?

3. Quoting Kevin at Always Low Prices: "... why should employers be involved in the financing of their employees' healthcare at all? Private employers don't pay for employees' housing, education, food or recreation, so why healthcare?"

4. In the same post (brilliant segue) coming up with line, "Would anyone like to make book on whether the U.S. gubmnt will bail out the GM workers' health care plan if necessary?" about the story on whether GM will be able to fulfill its commitments to pay health insurance for its retirees.

Before asking that question he stated
if I were retired from General Motors, I might have preferred to be paid more and to choose my own health-care provider rather than be worried about whether my health care would be covered in the future.
Chilton's reply: GM and Auto Workers conspired against the American people. They took a gamble the GM could survive despite making these heavy delayed compensation commitments to the Auto Workers. They calculated that Americans would bail them out if things went sore. That's opportunism based on an implicit contract. The good hearts of the American people created the moral hazard. They were taken advantage of by GM and the Auto Workers. I use the loaded term moral hazard because I'm feeling judgmental this morning. I'd use adverse incentives if I was feeling more even handed.

Why use delayed compensation? The American people have not shown they are inclined to pay Wal-Mart workers health insurance (although they have shown themselves prone to punish Wal-Mart workers by boycotting Wal-Mart because it doesn't pay health insurance to its workers). But when it comes to retirees and commitments made by a company's management 20 years ago, they have shown themselves willing to fulfill promises a company now can no longer keep.

P.S. - Employer-paid health insurance is like saying the party on which a tax is levied pays all the burden. Things don't work that way. To the extent that state-mandated employer-paid health insurance is binding it makes the worker pay for something she would not purchase if she had sovereignty over how she spends her compensation package.



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