Executive Proposed Budget for FY 2012-13
Executive Budget for Fiscal Years 2012 and 2013
By Daniel Akst
What if you went to work on payday and, instead of a check, your boss handed you a basketful of groceries, 40 gallons of gasoline and a voucher good for a couple weeks in a motel? Would that really be so strange? There’s a good chance you already get health insurance through your job, and count on your employer one way or another for some of your retirement and for insurance of various kinds.
Yet it makes no more sense for your boss to provide a pension than to give you a box of cornflakes. Economists will tell you you’re the one paying for these benefits anyway; without them, your employer would have to pay you that much more money to keep you on the job. There are some good historical reasons we’ve built up the benefits system that we have. Benefits, for instance, are mostly tax-exempt for workers, and require no payroll tax of employers. (Of course the government just taxes us some other way to make up for this.) But our employer-based social welfare scheme is collapsing. The shame of it is that we haven’t yet figured out what should take its place.
Consider that only 45 percent of adults are covered by employer health plans, according to a recent Gallup poll. And workers are bearing more of the soaring cost of employer coverage. From 2000 to 2010, the employer share rose 114 percent. The worker share rose 147 percent.
The Obama health reforms, which would seem to have enshrined employer health coverage, will probably undermine it in the long run by exempting smaller employers and letting larger ones buy out.
As to retirement, only 15 percent of private-sector workers have traditional “defined benefit” pension plans. In New York, by contrast, the vast majority of public employees have them. The transition from employer benefits is both inevitable and good — as long as we replace them with some other kind that everyone pays for and gains by.
Why? First, the current system is wasteful. In the case of health care, it obscures the true cost — which is staggering — by shifting it around, encouraging overutilization. Thus, we spend proportionately more on medical care than any comparable country, yet fail to cover everybody. The current system also gives an unfair bonus to employees with families, whose health benefits are, after all, just a form of higher pay. Budding entrepreneurs are kept from quitting jobs to start their own businesses because they might not be able to get or pay for health insurance.
As for pensions, we might as well admit that the self-directed retirement system we’ve been evolving is a failure. People don’t have the discipline to save enough or the ability to handle their own investments. And if retirees are someday living in the streets, the remaining taxpayers will have to take care of them anyway.
We could force employers to provide pensions, but they would just make up for it with lower wages. Stronger private-sector unions (now at a low ebb) might help, but can’t remedy the many other failings of employer-based benefits.
Look, we’ve embarked on a stealth program of socializing medical and retirement benefits, only haphazardly and unfairly. You may not have noticed, for example, but at least half our medical spending is now done by government. Wouldn’t it be better to move toward a more coherent health and pension scheme, in which all pay and all are covered?
Akst, a columnist for Newsday, is the author of “We Have Met the Enemy: Self-Control in an Age of Excess” from Penguin Press. Distributed by McClatchy-Tribune.
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