Healthcare and Pensions

HEALTHCARE AND PENSIONS….The problem ? one of the problems, anyway ? with employer-based healthcare and pension plans is that healthcare and pensions are long-term benefits. They only provide real security for new workers if the company itself remains a thriving concern 50 years later, but a company that provides retirement benefits for 50 years is much less likely to thrive than one that doesn’t. Malcolm Gladwell comments:

Here, surely, is the absurdity of a system in which individual employers are responsible for providing their own employee benefits. It penalizes companies for doing what they ought to do….The current arrangement discourages employers from hiring or retaining older workers. But don?t we want companies to retain older workers ? to hire on the basis of ability and not age? In fact, a system in which companies shoulder their own benefits is ultimately a system that penalizes companies for offering any benefits at all.

….Under the circumstances, one of the great mysteries of contemporary American politics is why [General Motors CEO Rick] Wagoner isn?t the nation?s leading proponent of universal health care and expanded social welfare. That?s the only way out of G.M.?s dilemma. But, from Wagoner?s reticence on the issue, you?d think that it was still 1950, or that Wagoner believes he?s the Prime Minister of Ireland. ?One thing I?ve learned is that corporate America has got much more class solidarity than we do ? meaning union people,? the [United Steelworkers’] Ron Bloom says. ?They really are afraid of getting thrown out of their country clubs, even though their objective ought to be maximizing value for their shareholders.?

GM’s management faces higher costs than its competitors in other countries because it has to pay its employees’ healthcare costs and Toyota and Volkswagen don’t. GM’s workers are no better off: their pension benefits are at risk because their continued existence depends on the health of one company, rather than the health of an entire country. So who benefits from this lopsided system? No one except the insurance and financial services industries that administer these plans.

And yet, as Gladwell points out, America’s corporate chieftans remain reluctant to endorse the common sense notion that the risk associated with healthcare and pensions ought to be spread as widely as possible and administered as cheaply as possible. Their ideological blinkers (“Eeek! It’s socialism!”) are simply too strong. Conversely, young companies like Google ignore the whole issue because they figure they’ll always be young and fast growing. They’re wrong, but that’s what they think.

It’s not clear what it will take to get everyone to start thinking straight about this. Maybe a few more big bankruptcies will do the job.

Via Ezra Klein.