[heavyset_go]

> if companies did not offer health care as a perk, they would be able to offer higher salaries instead.

Prices, including labor prices, are not determined by costs. There is no indication at all that companies would compensate employees more if they didn't have to pay for their health insurance. What is most likely to happen is that companies will pocket the difference, in the same way they've been pocketing the difference from increased productivity while letting wages become stagnant.

[mywittyname]

They probably would. I've had a lot of jobs that heavily emphasize how much is paid for benefits, and often it's used as justification for why raises weren't offered that year. These places would probably be happy to give everyone a raise and do away with the frustration with medical benefits, especially plans whose cost go up like 20% a year.

There are a lot of jobs which do not offer benefits, or benefits are offered with no part paid by the employer. These places would not offer raises, but these people would end up with better choices of private plans.

Benefits are a huge burden for companies, especially smaller ones. Coordinating benefits is a seasonal full-time job that someone has to do. I've known of a few smaller family businesses that gave everyone a raise, and told them to get their own health care coverage on healthcare.gov.

[heavyset_go]

> They probably would. I've had a lot of jobs that heavily emphasize how much is paid for benefits, and often it's used as justification for why raises weren't offered that year.

Sounds like an excuse to me, and if they're this bitter about paying for benefits, something tells me they'd be just as bitter towards giving substantial raises across the board for, essentially, no reason.

[brightball]

Comments like this give the impression that there’s an assumption that business owners are all just swimming in money and not one or two bad months away from bankruptcy. Most businesses do not survive more than 5 years for a reason.

[bduerst]

Businesses that cannot afford to retain talent and remain competitive deserve to not survive, in order to make room for more efficient organizations. This is a principle of the free market.

Also as a principle, regulating said free markets for QoL improvements (e.g. min wage, HI, disability, comp, soc sec, etc.) affect all participants - both efficient and destined-to-die businesses alike. If you can't exist through playing by the rules that everyone has set, why are you still in business?

[brightball]

Should they? Every business doesn’t have millions of dollars in cash to burn trying to find product market fit. Most start from nothing or personal savings, perhaps partially from the salary of a spouse.

When you start a business there’s an expectation that you’re probably not taking a paycheck from it for a few years while you try to attract customers to provide steady cash flow.

While doing this, you somehow have to find a way to hire people to help you grow.

If it doesn’t work out, the business owner loses everything most likely and will probably be on the hook for the space they were leasing.

Now if you survive and make it past all that, hopefully everything stabilizes and you’re able to run a successful business that can return more to you than you put in…but it’s hard. Very very hard.

This “should that business even exist” stuff comes from not having any idea how hard it really is and how much is really on the line or the ups and downs along the way (which are even harder when you’re trying to make payroll).

If it was easy, everybody would do it.

[lostcolony]

>> When you start a business there’s an expectation that you’re probably not taking a paycheck from it for a few years while you try to attract customers to provide steady cash flow.

>> While doing this, you somehow have to find a way to hire people to help you grow.

Where is that expectation coming from? It's fine if it's a side business you're looking to bootstrap or something, or if you have enough seed funding (which can be in the form of your own savings if you're okay risking that) to be revenue negative for a time, but if you have enough funding or revenue to consider hiring people, the first person you should be hiring is yourself.

>> If it doesn’t work out, the business owner loses everything most likely and will probably be on the hook for the space they were leasing.

This is why you create a -business-. A legal entity separate from yourself. An LLC at the minimum. So that your personal liability is (wait for it) limited. If you're doing a sole proprietorship or something, where you'd be on the hook for everything, WTF are you doing hiring people and signing leases?

[Aeolun]

> When you start a business there’s an expectation that you’re probably not taking a paycheck from it for a few years while you try to attract customers to provide steady cash flow.

I think this is only true for a newfangled SF business.

Traditional business gets a bank loan, has a business plan, and pays salaries from the start (including to the owner).

[gruez]

> Businesses that cannot afford to retain talent and remain competitive deserve to not survive, in order to make room for more efficient organizations. This is a principle of the free market.

This assumes that such "more efficient organizations" can even exist. If they are possible, why aren't they already around? Are those "Businesses that cannot afford to retain talent and remain competitive" that you speak of somehow preventing them from existing?

[bduerst]

Markets are zero sum. Competition ensures that an inefficient business will lose out to efficient competitors.

In most markets where efficiency is not achievable, then businesses are not entitled to exist. This is why things such as tax subsidies and other forms of funding are used to bootstrap new markets (e.g. green energy) that have a net social gain.

[FpUser]

>"Businesses that cannot afford to retain talent and remain competitive deserve to not survive, in order to make room for more efficient organizations. "

Reads like maximalist statement with zero clues about the subject.

[apalmer]

This is basic concept of the free market. it is valid to reject this concept. The free market is basically a religion in the US.

However if you reject this ideal which is the western worlds baseline, then you really have to provide some info on what framework you are arguing from…

[MomoXenosaga]

And why does that matter? Should we all work for free then in order to help out our employers?

[compiler-guy]

It matters in the present context because we are talking about how employers would respond if employees didn’t expect health insurance as part of their job. If employers stopped paying health insurance, then it is extremely likely that they would not pass the savings on to employees, but to use it to maintain the business.

[bruce511]

Clearly there are all manner of outcomes if employers stopped paying for health insurance. Generalising is fruitless.

Yes some companies will optimize for profit - some already do that, amazon makes a killing while warehouse staff are low paid. Uber makes everyone a contractor specifically to avoid benefits and so on.

Other companies pay a living wage, and cost a "cost to company" for each employee. These may choose to pay the benefit as cash.

Where I live the tax benefit of health care applies to companies and individuals alike. Some companies have mandatory health cover, others have optional health cover, others have no health cover. Since there is no tax implication it's not hard for prospective employees to compare one with another.

Ultimately, some companies pay low wages, some pay high wages, that's somewhat tangential to health cover or not.

Speculating on what most employers would "most likely do" is, well, just speculation[1]

[1] large companies like amazon known for screwing employees? Yeah, I'm with you there - but I don't think most employers are like that.

[mywittyname]

It's not out of bitterness. People don't necessarily realize that benefits are as expensive as they are, or that they had been increasing in cost so dramatically. It's more like, "sorry we aren't giving raises this year, but we are covering an added $400/mo in insurance costs for everyone."

[lowercased]

A few years ago I sat in with a client on an 'employee meeting' where they discussed raises/insurance. No one had ANY clue what health insurance premiums were. The owner asked people what they thought it was per month. "$75? $99?" They went around the room. I said "$600". The whole room looked at me like I was nuts. The owner said "$560". Audible gasps around the room. People had literally no idea how much this stuff costs (this was... 5 years ago, IIRC).

[tshaddox]

I’m not really sure what that proves though. Each employee almost certainly saw the amount the employer was contributing when they selected their insurance plan. If they forgot that amount and later guessed a much lower amount, what does that demonstrate?

[lowercased]

> Each employee almost certainly saw the amount the employer was contributing when they selected their insurance plan

I've never seen that happen, ever, in 25+ years of being in the working world in the US. Not saying it never happens, but I've not seen it, and after asking around, no one I know has seen that info.

[munk-a]

I mean - that sucks and all... but cost of living is constantly going up. If a company can't afford to continue operating with the costs of wages that company should shutter its doors - that's brutal but it's also how markets are supposed to respond.

In Australia minimum wage laws means that Starbucks locations rarely have more than two people on staff - that's just economic forces causing a rational business response.

[bruce511]

Yours is a common belief, and I don't think you should be down voted for it, but you are wrong.

Firstly companies don't shutter, they downsize. The most vulnerable employees are the first to go, the higher paid ones are typically the most valuable, remain. Owners go last.

Secondly, in my experience, all employees would rather forgoe a raise and keep everyone employed that insist on a raise. We saw this first-hand in 2020. Lockdown brought extreme uncertainty but employees agreed to 50% [1] pay instead of massive job cuts.

Yes it helps that we pay staff well. Yes it helps that they get a bonus in the good years. Yes it helps that we have their interests at heart. Yes it helps that they are skilled and we don't want to lose them.

Yes, over the years some people have become redundant, but there are swings between good times and bad times, and no we don't shutter just because there's a bad time. That's explicitly _not_ how it is supposed to work.

[1] we had a min threshold for 50%, those under got 100%. Also thanks to govt assistance, and our ability to back-pay later, they all ended up "whole".

[2] ps - I agree on the need for a minimum wage. In almost all cases it is too low by a lot. And I agree that if you can't pay minimum wage, then you can't afford an employee.

[munk-a]

The thing I specifically wanted to highlight (which I think most readers missed) was that not receiving a raise is equivalent to receiving a pay cut unless we're riding at 0% inflation. Every year costs go up for employees and keeping them pegged at the same salary prevents them from being able to cover those costs as efficiently.

I've seen workers pidgeon-holed into low stagnant wages too often to accept it as a status quo when the companies employing them are posting profits - in the modern world we too quickly accept the fact that owners are supposed to take out lion's share salaries and profits need to continuously increase. A business can have a healthy existence just making the economic wheels spin and ensuring that employees are well compensated.

[WalterBright]

Benefit costs normally add 40-50% to the salary costs of an employee.

[Redimo]

I'm sorry, but my experience in work in many different segments shows the exact opposite to be true. Theres barely any company that takes "You can rise quickly thorough pay bands if you put in the effort", or "we would pay you more without benefits" seriously and is even being truthfully with you. I've had one company, the one where I'm at now, where I earn good money, get bonus and that bonus is determined by the companies performance. We had bonus when CEO etc. didnt get any because they messed up. We have great benefits (2 additional paid weeks of paternal leave, i.e.), but it's the exception to the rule.

[siscia]

What company is that?

[Aeolun]

Problem with raises is that you pay taxes over them before getting around to paying for healthcare, right?

If the company is paying it it’s just a business expense they can deduct from their income.

[benglish11]

Presumably in the idealized scenario ( where individuals purchased health plans themselves and not through their employer) the individual would get a tax break for the cost of their health insurance.

[tshaddox]

Also, group insurance rates are often lower than the rates an individual could purchase themselves.

[lostcolony]

Man, it's almost like we just need some sort of mandatory group that everyone falls into, and then has to pay into. But, we could also provide some tax break, refund, or otherwise just not collect the fee, from, those who couldn't afford it.

If only someone had some sort of working template on how this could be done in a cost effective way. I'm sure everyone, regardless of where they fall on the political spectrum, would rally round such an obvious net good in that case.

(I know that bit of sarcasm is a bit of a tangent, it just feels like this whole subthread is missing the obvious)

[Aeolun]

> it just feels like this whole subthread is missing the obvious

I think we just skipped over the part that we already know is never going to happen, however much that might be the ideal solution.

[RyanGoosling]

The purpose of a business is to generate profit. Giving out goodwill raises goes against this fundamental purpose unless you need to retain SF tech talent to maintain the business. Businesses would continue to minimize their expenses, the largest of which is generally Human Resources. I disagree with your perspective.

[JamesBarney]

This argument relies on a really weird assumption that companies aren't already compensating employees as little as they can get away with. That companies could compensate employees less by not offering benefits but choose not to out of the goodness of their heart.

If employers are already compensating employees as little as they can get away with then if they stopped compensating via insurance, they'd be required to compensate via salary.

[WalterBright]

> This argument relies on a really weird assumption that companies aren't already compensating employees as little as they can get away with.

Of course. And the employee negotiates for as much as he can extract from the company. That's how markets work.

[usefulcat]

Imagine a scenario where overnight, all US companies stop offering health insurance. In this scenario, all those employees who used to have health care would now have to pay for it themselves (or do without it). So they're all going to be expecting an immediate raise to compensate for this increased expense, and if not they'll almost certainly be looking for a new job that pays a lot more (after all, it's not like they need their old job for the insurance any more..)

If you're a company, unless you were already planning to do some mass layoffs, you're going to give most of them that raise because the alternative is having a bunch of people quit. And if you don't increase your offers for new hires, you probably won't be hiring anyone either.

[paulmd]

> If you're a company, unless you were already planning to do some mass layoffs, you're going to give most of them that raise because the alternative is having a bunch of people quit. And if you don't increase your offers for new hires, you probably won't be hiring anyone either.

And yet price stickiness is a thing that exists!

https://www.investopedia.com/terms/p/price_stickiness.asp

This is the problem with a lot of "econ 101" stuff, it makes these big sweeping assumptions like "markets are price-efficient and operate at market-clearance prices" and after spending econ 101 building it all up, econ 102 and 200 and etc etc will spend semesters telling you why it's all crap.

Markets are not price-efficient, real-world prices are very sticky, and that includes the price of labor (actually labor tends to be far stickier than most other products). For example, vanishingly few real-world employers are going to offer automatic raises to cover cost-of-inflation, which is the same mechanism that you would be relying on to increase wages after removing health-care benefits.

A lot of people in retail/food are still making the same $11 or $12 they were hired on at, despite much higher salaries often being paid to new hires (guess the efficient market hypothesis says their on-the-job experience has... negative value?).

Tech is its own little thing, competition for tech labor is much much tighter, of course, but that much is obvious. In the real world, you can already see that labor prices are very very sticky and owners will almost never choose to pass these savings along.

[KerrAvon]

The catalyst for that scenario is likely some form of effective universal healthcare, which you will pay for indirectly via taxes.

[axlee]

It will have to be paid for, as is everything, but it will cost much less both in aggregate and at a personal level. Source: any other country.

[lostcolony]

It also, to the grandparent's point, would not really necessitate anyone spending anything differently. The amount employers pay to private healthcare plans instead becomes a corporate tax; the amount individuals pay to private healthcare plans instead becomes an individual tax. But just by dint of it all going to the same pool, which now covers everyone, gives such massive pricing power that all those "$64 for an aspirin" BS charges will be cut to be in line with, yeah, any other country.

[maccolgan]

Universal healthcare funded via taxes is the exact opposite of insurance. Insurance premiums are decided upon your medical profile and risk. Taxes are based upon income, which has nothing to do with health.

[lowercased]

Perhaps insurance companies would have to start competing for the business of individuals and families, and... perhaps that competition should drive down the price some, so they could get our business? (ha ha ha, of course, not going to happen).

[wankerrific]

Sure. Just like “competition” in broadband has driven prices down across America.

[butlerm]

The reason why that won't happen spontaneously is that the employer purchased health insurance subsidy amounts to something like $273 billion per year (as of 2019). Employees would have to pay a comparable amount in additional income taxes to purchase comparable health insurance for themselves.

[axlee]

> Employees would have to pay a comparable amount in additional income taxes to purchase comparable health insurance for themselves.

This is false: they would pay a lost less in additional income taxes. Americans overpay for the same services as every other developed country. They are being fleeced.

[throwaway2037]

Another idea: Cut military spending by $273 billion.

[bb88]

Labor price is salary + benefit packages. Reducing the cost of benefits from the equation would mean the company has extra resources.

The company could:

* immediately raise people's salaries

* or hire in more people (which increases demand)

* they could take the extra profit and distribute that to shareholders

* or drop the price of their products and services and pass the savings on to the customer

* or they could make capital investments.

In most cases, I would expect salary prices to increase for labor (even if not immediately) or make people's current salaries more effective in purchasing power.

[AceJohnny2]

Most of what you've described is "trickle-down economics", and, well...

Also, you forgot the popular option:

* give (bigger) bonuses to their execs

[JamesBarney]

If corporations could stop offering health insurance in order to increase profits, why don't they do it?

[heavyset_go]

They're legally required to offer health insurance plans for full-time employees.

[butlerm]

Most employers did it for decades before they were legally required to. The tax benefit to having your employer purchase your healthcare has been substantial since about World War II and such plans have been commonplace ever since, outside of unusually small employers or employees who are marginally paid.

[heavyset_go]

> Most employers did it for decades before they were legally required to.

They also had pension plans, but these days, those are rare outside of government jobs. I wouldn't be surprised if companies clawed them back as the threat from unions dwindled.

[JamesBarney]

Most employers provide far more than the minimum required health insurance.

Also the penalty for large employers is much smaller than the cost of health insurance (50% to 18% depending on individual vs group coverage), assuming that if companies didn't provide health insurance they'd pocket the difference means companies should still pay the fine.

[austhrow743]

Ok. Why do they offer health insurance plans beyond the minimum? Why do they pay above minimum wage? Why do they offer beyond minimum PTO? Equity options?

[bb88]

I'm not disagreeing, but this is the way corporations work in 2022.

[nitwit005]

You're worrying overmuch about "the market". The US health care system is pretend free market. The government is paying for much of US health costs, and regulating various aspects of it.

What really matters is how the government policies would change when it's moved from employers to people. The government is likely to pay the costs for low income people, which will also mean their wages are likely not to rise.

[mbostleman]

Companies would "pocket" the difference? What pocket would that be exactly? Companies are in competition. While company A, might "pocket" the savings, company B will use it to their advantage in potentially any number of ways - paying employees more, reducing prices to customers, investing in new equipment. You refer to the 8 million companies in the US as if they're one entity that conspires in lockstep. That's not how it works.

[heavyset_go]

This would suggest that things like this[1] could never happen because of competition, but they have.

[1] https://en.wikipedia.org/wiki/High-Tech_Employee_Antitrust_L...

[nostrebored]

The philosophy of minimizing benefits to maximize salary is the one espoused by Amazon. It isn’t a hypothetical, it’s used by one of the most successful businesses on the face of the earth.

[mbostleman]

Collusion is the antithesis of competition. And it's illegal, hence the litigation. I am referring to the behavior of a free market, not an illegally fixed one.

[Calavar]

A 100% competitive free market is the analogue to a frictionless vacuum in physics. It's a convenient model for academic purposes, but it's not something that really exists.

[Daishiman]

There is no such thing as a free market. A free market is a spherical cow in a vacuum. Corporations are generally far more informed of the nature of labor markets than labor itself a don't risk an equivalent of getting a life-threatening condition while having no health care. Corporations also collude, whether directly or indirectly, in many fronts.

[fennecfoxen]

And yet the theories of the free market, like many physical models, retain significant predictive power!

[Daishiman]

In the grand scheme of things, in long-term timeframes, with huge error bars. Those error bars are big enough and the timeframes weird enough that it's not sufficiently useful even for entire industries over very human timeframes.

[JaimeThompson]

Does a free market exist anywhere on Earth?

[WalterBright]

> There is no indication at all that companies would compensate employees more if they didn't have to pay for their health insurance.

Employers use a figure called "total compensation" for what it costs them to employ someone. This includes salary and the cost of all the benefits, including all the so-called "employer paid" taxes and benefits. The WSJ ran an article long ago that showed employee productivity matched total compensation, not salary compensation.

Employers certainly do care about the cost. They don't care what percentage of those costs go to employee takehome pay. But offering pre-tax health insurance means the employer can offer less total compensation.

Any economic article that talks about salary instead of total compensation is either ignorant of accounting reality or is trying to mislead.

[closeparen]

Companies are paying the increase in productivity to the professional-managerial employees who are actually more productive because of technology, scale, etc. and not to the masses whose productivity is the same as ever.

Even when we talk about redistributing this increase, we mostly talk about redistributing it from the professional-managerial employees, who populate the higher personal income tax brackets, not from the companies themselves (corporate tax) or their owners (wealth tax). If you are right that companies and their owners are pocketing it, then we are looking for it in the wrong places. But it seems like it really is largely going to the PMC.

[maxerickson]

That's fine, the idea isn't to get rid of employer provided healthcare to make salaries go up, the idea is to get rid of employer provided healthcare because of the problems that come with it.

[heavyset_go]

Take a look at the individual market and what is offered on it. If you want a comparable plan to an employer's group policy, you will be paying close to a grand a month in premiums for just yourself alone, and you will have yearly deductibles to the tune of thousands (sometimes tens of thousands for a family) dollars.

Without increases in compensation, workers will suddenly have thousands of dollars in new yearly expenses just to maintain coverage, and many will be forced to go without coverage at all.

This wouldn't be a problem, though, if employer-provided healthcare was replaced with a universal healthcare system that most first world nations have had for ages.

[maxerickson]

So do you think replacing the insurance market is more or less likely when people think the 25% of their premiums that they pay are what their insurance costs?

I have pretty good insurance, when I started, a few weeks before the end of a year, some of the folks I was working with were bitching about how it didn't cover anything and was expensive (the employee premiums were tiny at the time and are still low).

[tiahura]

Prices, including labor prices, are not determined by costs.

That’s very much not the case for 99.9% of goods and services.

Prices for labor, i.e. wages, are set by the demand for labor, and workers’ opportunity costs.

[deelowe]

I think they would, at least in the short term. Most companies already include benefits their offer package.

[bduerst]

Health insurance is a budgeted overhead variable cost assigned to employee expenses. It's true that should HI disappear, not all of the HI cost will be transferred to employee salaries, but it's definitely a non-zero amount.

[munk-a]

And, I think, over time we'd see more and more of that HI cost be transferred to employee salaries. Supply and demand is often taught in classes as "If this bar shifts here the economically efficient price point shifts over to here" - the portion that ends up frequently omitted is that that shift takes time. It's why some taxes are leveraged on employers and some on employees - in the end the net result is the same, but we can end up enjoying decades of beneficial inefficiencies while the market works to respond to the shift.

[bduerst]

Yes, if HI becomes universal healthcare in the U.S., like most developed nations, then funding will be through a variety of means, inevitably involving income tax.

That said, depending on the splits, it's much more probable that the cost to "employee salaries" will be less than their typical OOP expenses anyways.

[kukx]

The companies compete for workers, especially highly skilled ones. One company rising wages would push others to react in a similar way assuming they compete for the same talent.

[photochemsyn]

Not so sure about that. Anti-poaching agreements are supposed to be illegal but I imagine this kind of thing continues today in secret:

https://www.cnet.com/tech/tech-industry/apple-google-others-...

[heavyset_go]

And yet wages for highly skilled workers haven't kept up with productivity increases, cost of living increases and inflation in many parts of the country, including areas like SF or NYC where you find some of the highest paid workers.

[bb88]

Productivity increases create less demand for labor, so you would expect the demand for labor to drop. If two workers now can do the job of four people five years ago, it doesn't mean the two workers get paid double.

[munk-a]

Somewhat and I think highly skilled workers actually "suffer" from the worst relative compensation. Most legitimate 10x-ish developers don't make 10x what their coworkers are making, they end up producing significantly more value for the company then they're costing with the excess value going to profits and subsidizing other employees.

I personally think a model like this is pretty fair, if somebody is making 50k a year then pulling in 1M annual is pretty silly - but it makes sense to account for that difference with taxation rather than the arbitrary choices of private employers.

[jwilber]

Yes. As someone with a chronic health condition living in America, I agree completely.

Leaders of this country really do not care about the healthcare of its citizens (just look how long people with diabetes have been screwed, how long people have been able to lose literally everything over medical debt, etc.), I can’t imagine leaving things to the individual would be helpful in any manner whatsoever.

[zaroth]

Budgets are set by costs. When you run a business, you care about the “fully burdened” cost of each employee, and you hire as many as you can within your budget. One of the line items in that is my half of the payroll tax. Another line item is health insurance. Another may be an offset for office space and equipment.

Whether my fully burdened cost budget has a line item for health insurance being paid to a 3rd party or to the employee is totally irrelevant. Tax law currently happens to make it much more efficient for me to pay that money to a 3rd party, so that’s where it goes.

The reason I have that line item is due to a combination of market forces and regulation. By no means do I get to choose just not to pay it, if I expect employees to keep working for me, or the government not to shut me down.

[aYsY4dDQ2NrcNzA]

> When you run a business [...] you hire as many as you can within your budget.

It sounds like you’re saying that employers are always trying to hire as many people as possible.

Which would be nonsense, of course.

[zaroth]

That’s not what I wrote. In fact, not even what you quoted me as writing.

A bizarrely uncharitable non-takedown, and completely besides the point as well?

[aYsY4dDQ2NrcNzA]

I’m sorry for the misunderstanding, but I believe I have quoted you accurately.

[chrisseaton]

> and you hire as many as you can within your budget

If you believe this then what's your explanation for why Google hires a smaller number of expensive engineers, rather than a larger number of cheaper engineers? They could hire 10x if they went for only lower-tier college new-grads!

[zaroth]

Sorry if I missed the word “qualified” - I felt it was presumed by the word “hired”.

Obviously a business would not be particularly successful hiring janitors to write code simply because they could pay them less.

[lbotos]

Google is budgeting for more expensive engineers, so they end up hiring less.