I think there's several separate issues: Krugman correctly points out that work disincentives are different from job destruction. However there are different kind of work disincentives: it is certainly hard to view people working _just_ for healthcare (as opposed to switching jobs, retiring early, or starting their own business) as something positive. By all means, disentangling healthcare from employment is at least a worthy goal -- there are many artificial reasons which currently make non-employer health insurance (and non-insurance health care) far more expensive than would otherwise be.
On the other hand, the individual mandate and increased price of even the most basic catastrophic coverage does seem to cut into disposable income, which (in a sense) has the equivalent effect of huge marginal tax hike: essentially as the salary increases, essential benefits decrease (no eligibility for food stamps, subsidizing housing, or subsidized healthcare), while taxes increase. Incentive to do anything other than get by decreases, strong incentives are created to cut out other "unavoidable" payments such as by moving to places with less expensive housing costs, even if at the cost of less employment opportunities. Replacing the system that offers increasingly little to honest working poor(1), but imposes regressive mandates to fund what are essentially transfers from working classes to middle-class senior citizens (e.g., medicare and social secure) with a a universal basic income (funded through income tax or perhaps a Georgist "rent tax") would help, but making it a political reality may be tricky but feasible ( see here for an interesting analysis from a "left-libertarian"/classic liberal perspective: http://bleedingheartlibertarians.com/2014/01/the-positive-po... )
This does not automatically imply that various "mandates" of are always bad policy, the job of policy advocates should not be to hand-wave issues, but to present them in a way such that the public could make an informed choice. There are many times where Krugman does an excellent job of this (indeed, I'd imagine he rightly sees this as the very point of his NYT column); yet, it's odd that while Tyler Cowen (another trained economist) discusses this topic in a great deal in Great Stagnation and Average is Over, Krugman does not mention this and talks about what is really a related, but separate (even if important) matter of income inequality. Honestly, I don't see how income inequality (which is a serious danger for many reasons -- I don't mean to handwave it) has a role in this: if we raised the salary of teachers in Bay Area to that of software engineers, these salaries will still remain minuscule compared to that of top CEOs, but does anyone doubt that this would greatly increase teachers' job satisfaction? The problem with low pay isn't that someone is paid higher, the problem is that low (or no) pay makes life extremely stressful as basic needs and rudimentary wants are harder to fill: never mind being able to send kids to college, it's more about being able to afford a place where kids have a room to themselves while still having room to grade class papers after work -- one can't afford this on a teacher's salary in most parts of Bay Area.
(1) This is what irks me a lot about the debate on this topic. It's one thing to argue that welfare programs are wrong because taxation is wrong (then your job is to prove that taxation is wrong), but if taxation is wrong why not first cut programs that impose a greater tax burden? Military and medicare spending each cost more than food stamps and don't seem especially under-funded, yet it's the food-stamps program that got cut.
Why it is hard to view working "just for healthcare" as positive? Is it hard to view working "just for money" as positive? I.e. suppose that one works only because one needs money and otherwise he would spend his time playing Tetris, walking on the beach and reading medieval poetry. Why is it negative that he still works and not lives off other's money and other's work, involuntary taken?
If this is not negative, then how is it different for healthcare? It's the same money, only spent in a different way, mostly because american tax code is weird and the government tried to mess with pay arrangements repeatedly which gave birth to various fringe benefits including employer-sponsored healthcare. But at the end of it, it's the same money, isn't it?
>>> one can't afford this on a teacher's salary in most parts of Bay Area.
If you raise salaries for a wide class of employees - what do you think will happen to the housing prices? Also, where would the money come from? California has about 300K teachers. Each 10K of salary increase would cost 3 billion dollars (not counting pension costs, employer's part in taxes, etc. so actually more). Where those additional billions would come from?
The second and third highest paying districts are both located in Santa Clara County, which is also home to Silicon Valley. The average salary in the Mountain View-Los Altos Union district is $100,530, while Los Gatos-Saratoga Joint Union has an average salary of $92,636.
Considering other benefits like pensions, I'd say not so far from that of many software engineers.
I think the difference is that prior to the ACA, you didn't have much of a marketplace for the self insured, so you were artificially tied to your employer for the group insurance coverage.
The ACA is apparently not perfect (I, like most people haven't read the law:) ) but I think anything that keeps people from becoming serfs is a good thing.
Your argument about healthcare being money in a different form is flawed. You could make a similar argument for when people used to live in employer provided housing because owning their own homes was impossible for most people. I am sure not too many people would want to go back to serfdom because after all a roof over your head is another form of being paid.
I'm not sure - how paying for your own needs with your own earned money is "becoming serf" and why getting rid of the necessity for work in order for your needs to be paid for is a good thing?
>>> You could make a similar argument for when people used to live in employer provided housing because owning their own homes was impossible for most people.
When and where there was such time? If you refer to real slaves or serfs - they couldn't own property not because it wasn't affordable but because they did not have rights to own anything, being property themselves. Nobody argues for that. However, earning one's own housing or food or clothing or healthcare is in no way serfdom - it is a natural state of a person, the alternative being somebody else earning them and you just take them because you're too good to work, unlike that other guy. But what if that other guy thinks the same? If nobody has to work to earn their own living - who'll be supplying all these nice things you feel so entitled to enjoy?
Now in many cases: farmworker housing, worker barracks in some industries, particularly mining, energy, and sometimes forestry or other remote work (say, employee compounds for US oil workers in Saudi Arabia and elsewhere in the Middle East). Factory barracks are commonplace in China and other developing nations. Railroad workers, sailors, and other travelling employees are often lodged by their employers. I've also seen more than one startup in which there was a corporate apartment, though that was usually used on a fairly short-term basis by new hires, or in some cases, by founders or remote employees when travelling to other sites.
The "Company Town" Wikipedia article offers more information on the practice. Within the US it's largely associated with extractive industries, as I noted, arising in the mid 1800s and largely dying out by the 1950s: https://en.wikipedia.org/wiki/Company_town
Company towns existed not because housing were unaffordable but because there were no infrastructure in the place where company needed it to be before they came there. In your own link it says the company rented out and old off the property once built, thus negating the claim ownership or renting this property was not possible.
Not necessarily. Farmworker housing is offered in areas where there are alternatives, but the needs of the worker population often don't match the needs of growers: periodic work, a mobile workforce, and a concentrated area in which work crews can be picked up and dropped off, as well as a generally below-market income for the tenant population. Similarly, modern worker factory housing often exists to support a large migrant population.
The question I was answering wasn't the "why" but the "when", most specifically that it's still happening now.
"It" that is happening now is not "it" we were discussing. Clearly, if you're catering to migrant population, homeownership is not a good solution for them. It's like saying hotels exist in New York because nobody can afford a house in New York. That's not the reason - the reason is that whoever needs to live in New York for two weeks won't buy a house there, unless he's a crazy billionaire. Worker housing exists, but it does not exist because otherwise workers couldn't find a place to live and thus making workers enslaved by the housing owners. It exists because it is a cost-effective solution for providing housing needs of the temporary workers, and it is natural for the employer that needs the workers to take care of their housing in the most efficient manner - thus reducing both their own costs and costs for the workers. It has very little to do with housing affordability and workers somehow being "serfs".
I disagree. The situation describe continues to exist both in the US and (more particularly) outside it. It's not always structured to make the employees utterly dependent and in debt to employers, though (usually for lower-skilled workers) this does remain the case, and is a key argument against "company towns" or other forms of employer-supplied housing in the absence of other competitive housing markets.
And the point you're trying to make about immigrant or periodic labor is precisely the problem that applies to serfs: they lack the means (or legal ability) to make their own discretionary housing arrangements.
For higher-skilled workers, who have other employment options, this typically isn't the case. Also where employees who operate under union or similar collective bargaining arrangements.
> However, earning one's own housing or food or clothing or healthcare is in no way serfdom - it is a natural state of a person
If we take a historical/anthropological view of what the "natural state" of human societies is, they have typically worked to fulfill essential-to-life needs, including defense, water, food, public health, fire response, etc. on a communal basis. The size of the communal unit has varied across times and places in history, from clans to tribes to city-states to nations. And hybrid systems where individuals (or more often, households) are responsible for some things and a larger communal unit is responsible for others have also been common. But the individual standing alone, providing for his or her needs entirely independently of any communal system except for market purchases, seems to only exist in certain philosophers' systems, not as something you really observe historically as the natural state of homo sapiens societies.
I currently live in Zambia, and employees are frequently provided housing; either housing or a housing allowance is standard in most contracts. This is obviously the extreme, but there are tons of people in the world for whom owning property is functionally if not legally impossible.
Why do they provide housing and not pay workers to rent the same housing? Why part of the salary must be designated "housing allowance" instead of just calling it "salary" and let the worker decide to spend it on housing?
Owning property outright might be hard to a lot of people, but there's an easy solution for it - renting. What you describe is functionally renting. The question is - why is it organized this particular way?
Why do they do it? Because it allows the easier control of workers and a direct clawback of wages to the company, while being fairly quality-inelastic.
To be honest, I have a hard time believing you're asking these questions in good faith. This is basic stuff.
I'm not sure why this is the case in this country, but right now in Germany some companies provide leases on the cars. It turns out it's a tax reduction and "support local industry" at the same time - if same amount of money is just paid as salary, combined taxes for company and employee are higher. And it also supports local economy since lease choices are for german cars only. And I heard that same leasing practice is common in Israel as well.
As a strange quirk they also pay for gas used by these leased cars. As a result, my friend with such lease always tries to do vacation in spots reachable by driving - it's just much cheaper for him, even if he has to drive for two days to get there.
Tax reasons are the most common source of fringe benefits. As you mentioned, in Israel, a company car is a commonplace benefit among hitech workers, while in the US it is almost unheard of - because of the differences in how this benefit (and cars in general) are taxed. Though with recent change in Israel's tax code this became less popular, but some decade ago a company-provided car was an assumed part of the standard benefits package.
However, we have been talking about housing being provided by employer because there's no other means to get housing, so this is completely different case - here company cars are the function of government-introduced tax law, not of prices of the cars.
There's usually a little classist attitude going on. Labor class 27 will only be allowed to live in labor 27 class apartments, etc. No selecting your own personal lifestyle balance allowed, after all we only hire perfect replaceable cogs so it won't be an issue anyway.
Allowed by whom? I.e. suppose I am labor 27 class employee, and I come to class 1 apartment and say "I will pay class 1 price, please rent it to me". Would I be rejected? What would be fueling this rejection? Who will be prohibiting me from selecting my own living arrangements? The parent post say housing allowance is common, who will be checking I spend my allowance on an apartment that matches my class and not instead rent a higher-class one?
I think you are giving too much weight to the people getting something for free argument...the subsidies are income based, meaning a lot of these people were never going to be able to get insurance even at work.
You can more or less tell who gets employer-based health insurance based what they're paid. I doubt too many people are going to stop working because they qualify for ACA subsidies, you still have a whole lot of things you'll need money for. I see the ACA subsidies as a way to make people more proactive about their health and keep them out of emergency rooms which is significantly more costly to the system.
As far as older folks working less because they are not tied to their employers for healthcare I think this is a good thing. I see more opportunity for younger folks to move into those jobs.
>>> I doubt too many people are going to stop working because they qualify for ACA subsidies
Equivalent of 2.5 million workers is too many or not too many?
>>> I see the ACA subsidies as a way to make people more proactive about their health and keep them out of emergency rooms which is significantly more costly to the system.
This is also proven not to be true. Having insurance, actually, raises usage of emergency rooms by 40%. See: http://www.washingtonpost.com/blogs/wonkblog/wp/2014/01/02/s...
It was a nice theory, too bad it's not true. But repeating it now, when it is disproven by experiment, is just substituting ideology for facts. It is not going to get us in any place that is good.
>>> As far as older folks working less because they are not tied to their employers for healthcare I think this is a good thing.
What is special in older people that them not working is good? Is that that we want the most experienced workers to be removed from the workforce, so that the productivity would drop, because lower the productivity, richer we are? And when replacing experienced and productive workers with unexperienced workers with much lower output and who also are paid much less, while moving the experienced workers from productive work to tax-sponsored welfare (which the younger workers now have to support with their salary, which is lower to begin with but now becomes even lower from having to support older folks too) - so tell me again, where the good part starts in all this? Because I kind of fail to see it.
I have to agree with you here. The problem with insurance for routine care (the system we have in US) is that it makes the information asymmetry problem worse: since it's someone else's job to negotiate the price of routine day-to-day items, there's no incentive for individuals to make sure they're getting a good deal. This is equivalent to going through automobile insurance for oil changes and other routine maintenance.
The fact is if you have health insurance you are likely to engage in preventative care activities (eg regular primary care visits) that you would otherwise avoid without insurance, however you look at it, this is a good thing.
The fact that people may run to the ER unnecessarily even with insurance is perhaps a reflection of other problems (maybe too many hypochondriacs Googling :)? ), but that isn't a reason to not make healthcare accessible.
If the choice is between people over say 60 desperately holding on to jobs because they can't afford health insurance on their own, versus young people getting opportunities to start their own lives then the choice for me a rather simple one.
PS: I have no ideological axe to grind in this matter. If we are going to live in a modern society, these are problems that have to be dealt with somehow.
I grew up in a place and a time where people died in gutters (no exaggeration) from hunger and disease, that is the difference between a modern civilized society and one that isn't so. It is a choice that has to be made. The dignity that is afforded to people by social programs is a dignity consequently bestowed upon all of us.
The reason those insured by the government go to ER's is because the regular clinics TURN THEM AWAY. The government program doesn't pay enough to the clinics and doesn't force the clinics to accept the patients. Judging by the 3rd degree my wife got from a dermatologist a few weeks ago, those covered by coveredca.gov are going to be in the same situation.
And by "clinics" I mean all those non-ER businesses that purport to offer treatment to the public for a fee, such as private-practice doctors.
> Why it is hard to view working "just for healthcare" as positive? Is it hard to view working "just for money" as positive?
Working for the sake of something you want is a positive. Working just to avoid dying isn't.
> suppose that one works only because one needs money and otherwise he would spend his time playing Tetris, walking on the beach and reading medieval poetry. Why is it negative that he still works and not lives off other's money and other's work, involuntary taken?
Because he's less happy, fulfilled and so on than he could otherwise be. If the amount he suffers by working is more than the cost of the taxation that would support him, then yes that's absolutely a negative.
> Why it is hard to view working "just for healthcare" as positive? Is it hard to view working "just for money" as positive? I.e. suppose that one works only because one needs money and otherwise he would spend his time playing Tetris, walking on the beach and reading medieval poetry. Why is it negative that he still works and not lives off other's money and other's work, involuntary taken?
That doesn't sound quite correct. Working just for the money is a neutral, the _negative_ here is involuntary taxation. I agree that it's in a negative (and have pointed out later in my comment a particularly bad form of it), but some kind of taxation is unavoidable (anarcho-capitalism is a fascinating theory, but none of its variants strike me as realistic).
Further, I'm not advocating a system that covers every single type of heath benefits for free. I'm simply talking about insurance against catastrophes and in some cases arguing against government interference -- e.g., the kind that essentially made healthcare go through employers and insurance agencies, as opposed to Milton Friedman's idea of MSAs (a stronger form of HSAs/high-deductible insurance -- something that ACA has actually made more expensive).
Essentially it's about marginal utility: having no healthcare available is much worse than not having certainly elective healthcare but having other healthcare. Likewise earning $0 vs. earning $15k a year (not enough to live on in Silicon Valley, but ok for getting by elsewhere in the country) is much bigger difference than the difference between earning $15k and $30k, which is a much bigger difference than going betwen earning $30k and $45k. No one should be entitled to a comfortable life, but I don't think a system where individuals who are not employable (whether involuntarily or voluntarily) are left to rely on charity alone is one that will ever be created (irrespective of whether or not it could be theoretically justified). I'm an advocate of scraping the current welfare state and replacing it with a simple basic income payment (if that's not politically feasible, I'm fine with Friedman's idea of a negative income tax). This will actually lead to less government interference: less welfare programs, possibly lower (or at least no higher) taxes, and so forth. Here's an argument for this from a well known socialist organization Cato Institute (backed by such left-wing pinko commies as the Koch Brothers): http://www.libertarianism.org/columns/libertarian-case-basic...
Furthermore, in terms of reducing tax rates, I strongly favour slashing military and police spending (no SWAT teams for tiny suburbs), ending the drug war, and cutting middle class entitlement programs (or at least privatizing them or making them voluntary).
> If you raise salaries for a wide class of employees - what do you think will happen to the housing prices? Also, where would the money come from? California has about 300K teachers. Each 10K of salary increase would cost 3 billion dollars (not counting pension costs, employer's part in taxes, etc. so actually more). Where those additional billions would come from?
Raising the salary is not the only way to do so: increasing the supply of housing. I live in Saratoga and lived in Mountain View: the avg price of a resident (averaged between condos, townhomes, and single family homes) is well north of $1mm in those areas. In Mountain View this can attributed to location (and Sunnyvale which is directly adjacent is cheaper, especially the north parts of Sunnyvale closer to Mountain View), but in Los/Gatos-Saratoga this is entirely due to minimum lot sizes (my place is currently worth significantly below that -- but due to being in a small area that was annexed to Saratoga and which retained much smaller lot sizes).
My point also wasn't about the need of higher pay, it was about job satisfaction having more to do with being over certain thresholds as opposed to the bizarre idea that it had something to do with how much I am making in relation to some CEO.
Re: salary itself. This also does not include the pay that is docked to go to unions (union membership is mandatory for teachers in California -- I am all in favour of removing that requirement for unions of government employees). These are closer to starting salaries of SWEs not average salaries of all engineers (my first job out of college was $85k in 2006 at Yahoo -- not exactly a company known for highest wages). Finally RSUs are a huge part of engineer's salaries: $100k in RSUs vested over four years (with refreshers) is common for even new college grads. I am not advocating raising everyone's salary of course. I am in favour of treating teachers more as software engineers: merit pay increases, performance reviews, and no traps like tenure -- much as with software engineers, it should be easy for teachers to switch schools or move to a different area if their pay is not satisfactory (and as with software engineers, it might mean some would leave the profession if they are doing it just for the money and money doesn't suffice, this again is a positive).
I think you mistook me as someone advocating greater taxation -- done in the same manner as today -- I am not; I actually believe we far less meddling in our lives, certain kinds of taxes could be lower (but perhaps other kinds -- e.g., tax on rent per Henry George), and so forth. However, I find that arguing about immediately abolishing all taxation (logical outcome of what you're advocating) are going to work -- I much prefer to acknowledge that the problems much of the left perceives are real, but offer solutions that are less coercive than status quo or other alternatives.
On the other hand, the individual mandate and increased price of even the most basic catastrophic coverage does seem to cut into disposable income, which (in a sense) has the equivalent effect of huge marginal tax hike: essentially as the salary increases, essential benefits decrease (no eligibility for food stamps, subsidizing housing, or subsidized healthcare), while taxes increase. Incentive to do anything other than get by decreases, strong incentives are created to cut out other "unavoidable" payments such as by moving to places with less expensive housing costs, even if at the cost of less employment opportunities. Replacing the system that offers increasingly little to honest working poor(1), but imposes regressive mandates to fund what are essentially transfers from working classes to middle-class senior citizens (e.g., medicare and social secure) with a a universal basic income (funded through income tax or perhaps a Georgist "rent tax") would help, but making it a political reality may be tricky but feasible ( see here for an interesting analysis from a "left-libertarian"/classic liberal perspective: http://bleedingheartlibertarians.com/2014/01/the-positive-po... )
This does not automatically imply that various "mandates" of are always bad policy, the job of policy advocates should not be to hand-wave issues, but to present them in a way such that the public could make an informed choice. There are many times where Krugman does an excellent job of this (indeed, I'd imagine he rightly sees this as the very point of his NYT column); yet, it's odd that while Tyler Cowen (another trained economist) discusses this topic in a great deal in Great Stagnation and Average is Over, Krugman does not mention this and talks about what is really a related, but separate (even if important) matter of income inequality. Honestly, I don't see how income inequality (which is a serious danger for many reasons -- I don't mean to handwave it) has a role in this: if we raised the salary of teachers in Bay Area to that of software engineers, these salaries will still remain minuscule compared to that of top CEOs, but does anyone doubt that this would greatly increase teachers' job satisfaction? The problem with low pay isn't that someone is paid higher, the problem is that low (or no) pay makes life extremely stressful as basic needs and rudimentary wants are harder to fill: never mind being able to send kids to college, it's more about being able to afford a place where kids have a room to themselves while still having room to grade class papers after work -- one can't afford this on a teacher's salary in most parts of Bay Area.
(1) This is what irks me a lot about the debate on this topic. It's one thing to argue that welfare programs are wrong because taxation is wrong (then your job is to prove that taxation is wrong), but if taxation is wrong why not first cut programs that impose a greater tax burden? Military and medicare spending each cost more than food stamps and don't seem especially under-funded, yet it's the food-stamps program that got cut.