Minor Thoughts from me to you

Squeezing Out the Lower Classes

Madison's liberals spend a lot of time talking about helping the poor and improving the lives of the poor. This is, bluntly, a load of hogwash.

The Capital Times published another article about Wisconsin Health Care for All and their plan to offer health care to everyone in the city of Madison. In this article, I learned that most of the group's members are former Kerry campaign members. They were, understandably, depressed after Senator Kerry's loss in the 2004 election:

"We decided that we wanted to keep working," said Barbara Spar, who teaches human resources management at Madison Area Technical College. "We wanted to be for something. We wanted to use our energy instead of being depressed."

They decided to use their energy to implement universal health care on a local level -- Madison, specifically. As I wrote previously, the group wants to implement their plan by requiring all businesses in Madison to pay a portion of their payroll into an insurance fund. Businesses that already provide healthcare will be exempt from this new "fee".

The group boasts that they have an economist as one of their leaders: John Kalfayan. Therefore, group members are certain that their plan will not hurt businesses in Madison or lead to layoffs. Quite possibly they're right. If they are able to implement their plan, I have every confidence that no existing businesses will close. Furthermore, I'm fairly confident that no one will be laid off as a result of this plan.

That's not to say that this plan will good for everyone. This is one small group of people that would be hurt by this plan: those who have few marketable job skills. As an economist, I would expect that Mr. Kalfayan is familiar with the idea of "marginal utility". Simply put, marginal utility is the value that someone gets from the last unit of something. Think of it this way: for a hungry man, a single burger has great value. A second burger would be appreciated, but a little bit less than the first burger was. A third burger would be okay, but he might not miss it if it wasn't there. A fourth burger might even be ignored. The fourth burger then has a much lower marginal utility than the first burger did.

The same principle holds true in business. As businesses hire more employees, each employee will have a lower marginal utility to the business. If it is too expensive to hire an additional employee (for instance, if the employer must provide healthcare in addition to minimum wage), the business may choose to make do with the employees they already have. Thus, while this healthcare plan may not cause any layoffs it will, quite possibly, prevent new jobs from being created.

There is another factor that will come into play. As employees become more expensive, businesses will choose to hire only the best employees. If this new "healthcare fee" causes the minimum wage to rise from $5.50 an hour to $5.94 an hour, the employer will only hire employees who can contribute more than $5.94 an hour to the bottom line. This means employers will only hire someone who is fully trained and competent.

What about less qualified applicants? What about people who might have had trouble holding down a job in the past or who have limited work experience or who simply require a lot of on the job training? The answer is simple: it will be much harder for them to find work. They will be passed over in favor of applicants who can justify the higher pay scale.

Implementing this healthcare plan would remove the lowest rung from the economic ladder. Implementing this healthcare plan would lead to businesses squeezing out applicants who are inexperienced or under-qualified. For these people, Wisconsin Health Care for All is not offering a choice of a job without healthcare benefits or a job with healthcare benefits. No, for these people, Wisconsin Health Care for All only offers the choice of a job with healthcare or no job at all. Which do you think a desperate man would prefer: a job without healthcare or no job whatsoever?

I know which option I would prefer. The simple fact of the matter is, this plan would neither help the poor nor make them better off. It is a purely cosmetic fix that will have large, hidden repercussions. While Madison's liberals will pat themselves on the back for the workers they've helped, they'll be completely oblivious to the people they've hurt.

I'd rather focus on why Madison's businesses can't voluntarily offer health insurance. I have a sneaking suspicion that it might have something to do with the fact that only four states in the nation have higher taxes than Wisconsin. Unfortunately, that problem will only be made worse by taking a new payroll "fee" from local businesses.