Thanks to Hal for referencing The Washington Post's Ruth Marcus on Hillary Clinton the other day. I don't read Marcus too regularly, but when I do, it reminds me why not reading her is probably an IQ booster. In her latest, Marcus accuses Clinton of seeking to hurt American workers by her opposition to the upcoming tax on Cadillac health insurance plan. Marcus' logic, and she cites Brookings and the Obama administration as her back up, is:
1) These expensive health plans are being paid for out of wages paid to workers.
2) Eliminate the plans, which are basically a tax on wages and wages will rise.
3) Over time.
That last bit is fairly key and should probably be amended to "over time, if ever." The problem is that labor markets are highly inefficient. If you eliminate some form of non-cash compensation, it will not be magically replaced a cash payout. If, for example, the government eliminated the Social Security tax, do you really believe wages would shoot up by 12% or more?
That extra money does not have to go to workers. It could be used to buy back stock or to pay dividends. It could be hoarded in a savings account. It could be used to acquire a competitor and lead to a net reduction in jobs. There are, in short, a bunch of reasons why you can't count on this money showing up in your paycheck next week or even next year.
Another problem -- even if such a move were net neutral for wages over time and all of this money found its way back into payroll, there's no guaranty that you would get the money. If I eliminate health plans from Rick and Sally and decide that the savings should go to the workers, I can give all the savings to Rick -- reducing Sally's comp while giving him a wage. What's Sally going to do, quit? I actually only gave Rick half the savings. I used the other half to buy the only other place where Sally could have found a comparable job. You're screwed, Sally. But don't worry, Ruth Marcus says you aren't.