Will lowering the costs of benefits increase wages?

[johnaries]

I posted most of this in reply to another thread, but I felt it deserved it's own thread.

NOTE: I am talking about non-Union companies and positions. Unions would have to negotiate for higher wages. If that is too difficult for them, considering what I am about to say they should hire new negotiators.

Having worked closely with HR on wage and salary issues I can explain this very simply:

Employee wage and compensation is the largest single expense for all but a handful of companies. Therefore, employers want to make sure they hire quality employees to get the most productivity or "bang for their buck" as it is often called. Further, employee retention is very important because the process of hiring and training is very expensive with no return value until the training is completed.

Every company is competing with every other company for many of the same employees. To effectively compete, HR departments have to track the employee market and what other companies are paying and what benefit packages they are offering. Most "quality" employees seeking long-term employment are looking for a good benefits package as well as good wages.

Like everything else, employee compensation has to be budgeted. If the benefits cost less, then there is more in the budget for wages. In order to compete with other companies in attracting potential employees, with benefits being more or less equal the company will increase wage offerings. Other companies will increase their wage offerings in turn to compete.

Unfortunately, these wage increases usually begin with new hires rather than existing employees. But, as other companies "woo" existing employees away with the increased wage offerings the company will then increase existing wages in order to maintain employee retention.

Therefore, yes, lowering the costs of benefits definitely results in increased wages.

With regrads to rising insurance preiums, my company actually took a very progressive approach.

Our home office had a small "work-out" room. The company expanded it, enhanced it, hired two full-time Physical Trainers (we affectionately call one of them the "Work-out Nazi" because she is so strict, but everybody loves her and she gets results), and began multiple Health programs.

It not only got us huge discounts on Health Insurance, it increased productivity and overall employee satisfaction. It was so successful Gov Bredesen came for a tour and encouraged other TN companies to follow suit.

Unfortunately, the premiums continue to rise despite the success of this program. It may have garnered us huge discounts, but it's only a matter or time until the continued increases put us back in the same position we were before - if something doesn't happen to directly control insurance costs (such as restricting the MLR, hint, hint).

[flyarm]

1. Prez of United Steelworkers scoffs at those who say wages will go up

Prez of United Steelworkers scoffs at those who say wages will go up Sun Jan-10-10 02:24 AM
Leo W. Gerard, president of the United Steelworkers, scoffed at arguments that by restraining health costs, the tax would lead to higher wages

“The people who are promoting this tax say companies will make up for this with higher wages,” Mr. Gerard said. “These people who say that have never been at the bargaining table. It doesn’t work that way.”

http://www.nytimes.com/2010/01/09/business/09union.html...

[johnaries]

2. As I said in the OP

I am talking about non-Union companies and positions. Unions would have to negotiate for higher wages. If that is too difficult for them, ...they should hire new negotiators.

[sandnsea]

3. Is it not his job to say that?

And if he can convince you this is true today, why do you think he can't convince an employer to pay a higher wage tomorrow.

[johnaries]

4. Exactly.

[flyarm]

39. because the guy the dems are using as their expert had conflict of interest ..and used flawed

evidence otherwise!

emptywheel January 7th, 2010 at 9:09 pm
7
In response to WilliamOckham @ 1

Actually, the problem is much greater than that. People have repeatedly used Gruber’s work to support arguments that they don’t actually support (his only “proof” that the excise tax will raise wages is a study on how employers raise wages on non-fertile women after maternity care is mandated, and on that EVERYONE has based their claims).

So you have to ask–did a bunch of “intelligent” people just lose all their critical thinking skills? Or is someone feeding a bunch of other nominally independent “journalists” Gruber’s claims, and they’re publishing it for some reason or another?

xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx

and don't think for a minute the Unions don't know this info!!!!!!!

xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx

Follow the Money: Your Tax Dollars Bought Jonathan Gruber’s Services
By: Rayne Sunday January 10, 2010 10:30 am http://seminal.firedoglake.com/diary/23174

Firedoglake has been researching the relationship of MIT economist Jonathan Gruber with the Obama administration with regard to health care reform. You’ll find posts by emptywheel, dday and Jon Walker about the apparent conflicts of interest on Gruber’s part, that of the Obama administration and the media covering health care reform.

We’re still looking at the money – yes, follow the money, as Deep Throat once said – paid out to Gruber by the government. OUR MONEY, our tax dollars, paid out to Gruber under three administrations. You can view the numbers at this link, at which you’ll find a published spreadsheet with all information compiled from USASpending.gov and NIH websites (links to sources at the end of this post).

But there are more questions after looking at the data; perhaps the answers are innocuous and amount to nothing, but it would certainly be nice to have some answers.

What permits Gruber to be offered “non-compete” contracts?

What does it mean that a substantive number of the contracts offered to Gruber were let under classification, “Available only for groups such as disabled persons, prisoners, and regulated utilities”?

Why does Gruber have two business identities documented by two DUNS numbers, one of which is a nonprofit entity?

Why are the 2009 contracts for HHS paid to the nonprofit?

Why are there so many fields with “invalid” content or no content where one would reasonably expect some information?

xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx

edit to add: please take the time to read the comments section..much is disclosed here that should make every American suspect to what is going on!

xxxxxxxxxxxxxxxxxxxxxxxxxxxx

Jonathan Gruber Failed to Disclose His $392,600 Contracts with HHS (Updated)
By: emptywheel Thursday January 7, 2010 8:35 pm
http://emptywheel.firedoglake.com/2010/01/07/jonathan-g... /

MIT health economist Jonathan Gruber has been the go-to source that all the health care bill apologists point to to defend otherwise dubious arguments. But he has consistently failed to disclose that he has had a sole-source contract with the Department of Health and Human Services since June 19, 2009 to consult on the “President’s health reform proposal.”

He is one source for the claim that the excise tax will result in raises for workers (though his underlying study is in-apt to the excise tax question). He is the basis for the argument that the Senate bill reduces families’ risk–even if it remains totally unaffordable. Even Politico stenographer Mike Allen points to Gruber’s research.

But none of the references to Gruber I’ve seen have revealed that Gruber has a $297,600 contract with HHS to produce,

a technical memorandum on the estimated changes in health insurance coverage and associated costs and impacts to the government under alternative specifications of health system reform. The requirement includes developing estimates of various health reform proposals on health insurance coverage and cost. The alternative specifications to be considered will be derived from the President’s health reform proposal.

(h/t Mote Dai)

The President’s health reform proposal? But I thought this was the Senate’s health reform proposal?!?!? (wink!)

Now, HHS says they had to put Dr. Gruber in charge of evaluating health care reform proposals because he’s got,



go to link to read the rest!!!

but note in comments section..Emptywheels comment here:

emptywheel January 7th, 2010 at 9:09 pm
7
In response to WilliamOckham @ 1
Actually, the problem is much greater than that. People have repeatedly used Gruber’s work to support arguments that they don’t actually support (his only “proof” that the excise tax will raise wages is a study on how employers raise wages on non-fertile women after maternity care is mandated, and on that EVERYONE has based their claims).

So you have to ask–did a bunch of “intelligent” people just lose all their critical thinking skills? Or is someone feeding a bunch of other nominally independent “journalists” Gruber’s claims, and they’re publishing it for some reason or another?

[karynnj]

10. Then why has every union argued "they gave up higher wages"

for benefits. Now, if one could substitute for the other, it works both ways. Not to mention, it is for the unions where it would most likely happen.

The OP has real experience in an HR department.

The President of the union likely has one of the REAL Cadillac plans.

[spoony]

15. Because they were in actual negotiations

And no, it doesn't work both ways. If you really think company savings get passed on to the employees if they're not pursuing it in a contract, and just out of the goodness of the company's heart, you're going to be sorely disappointed.

[johnaries]

25. It's not "out of the goodness of their hearts", it simply competing

in the employee market. Companies would pay all their employees a penny an hour if they could get away with it. But they won't attract any employees that way. So, they have to offer a compensation packet that's attractive to potential employees.

At least, they do when employment levels are more normal. Right now, they don't have to - which is why Temp Agencies are up. Companies don't have to give temps benefits.

[Mojorabbit]

35. But arent there a ton of people

competing for the same positions? You read a lot of articles about thousands showing up for a few positions. I can't see how in this climate that employers have will act as you say. In better times yes but now there are people desperate for any work at almost any pay.

[karynnj]

42. Even for low skill jobs, the cost and hiring and training replacements

is significant. The entire theory behind unions is that when the employees act as a group they have significant power. For skilled employees, even without a union, have some ability to negotiate.

[karynnj]

32. I never said the "goodness of their heart:"

The OP gave you a good explanation of why - and it is actually magnified in the case of unionized companies.

[boppers]

40. Every union?

Wow.

Every?

I think you have an issue with that argument.

[Kurt_and_Hunter]

5. Of course wages would go up, but probably not 1:1

[johnaries]

8. In some cases less, in some cases more - because there are

other factors involved. For instance, unless we fix the current unemployment problem wages will probably go down. Being market-driven (whether "good" or "bad", it's what we have and what we must deal with) the primary driver of total compensation is supply and demand of suitable employees.

But if total compensation remains the same, then it would be a 1:1 ratio.

[OHdem10]

6. Companies are in business to make profits. Any money they save

on health care, they will put into the company for profit.

Why has the Adm. and everyone else been saying HIR will save
the companies money. To encourage business to offer insurance.
Not to increase workers' salary.

[johnaries]

9. You need to go back and read the OP again.

Yes, they will keep the profits IF they can get away with it. But the point is that they are competing for employees. Potential employees look at the total compensaton package. Companies are already keeping the total compensation as low as possible. As soon as one company raises wages in order to compete better, other companies will be forced to follow suit.

As for companies who do not currently offer insurance benefits, it will increase their competitiveness if they can do so.

Of course, first we must fix the unemployment problem. But that is a separate issue.

[spoony]

16. It may be a separate issue but your dismissal of the job shortage

problem and the obvious hole it blows in your theory is NOT a separate issue.

[johnaries]

19. I am most certainly NOT "dismissing" the job shortage. I have

admitted that it is a very serious issue and needs to be fixed. But I believe it will. And then, my observations (not "theory", but actual real-life observation) will once again be true.

[spoony]

20. You can't "observe" something that hasn't happened.

What you're talking about isn't the past. It's an untested future. It's a guess. And it's a guess built on an assumption that, so far, doesn't look too hot.

[johnaries]

23. Did you read my OP? I observed this in working with HR when

making adjustments to existing positions within my department and when creating new positions. It was pre-recession, to be sure. But it is nott some "untested future". It is (or was and will be once again) reality.

How does your HR department work? How do they determine compensation for different positions? Do they just pull salary packages out of their butts? You might want to ask them.

[TheKentuckian]

7. Phil Gramm? Is that really you? Welcome to DU!

What fucking planet have you been on? Employers are cutting wages, benefits, and employees. Wages are stagnant. The wealth disparity grows daily. Jobs are being massively outsourced. Real unemployment is over 17% and you're spinning yarns of pay raises. Jesus in heaven!!!

Go spew your trickle down to the enablers of corporate communism and social totalitarianism. Never mind, I reckon we have plenty here.

[johnaries]

12. No need for insults. But it would help if you allow yourself to think.

Yes, there are many other problems that must be fixed. The economy and unemployment, first. That is one of the reasons that Temporary employment is up. Employers don't offer benefits to temps, so as they start to rehire they are going to begin with temps because there are so many willing to work without benefits right now. Outsourcing is a separate issue that we need to address, I agree.

Part of the reason (and I emphasize PART of the reason) wages have been stagnant has been because of the increasing costs of other benefits such as health insurance. But because of the increasing premiums Total Compensation has been increasing. Wages have had to suffer because of it. And if nothing is done to stop the increases, wages will continue to suffer. Conversely, once the economy rebounds if the other costs of Total Compensation decrease, wages will increase.

Please note that I am talking about a specific case in response to others who have claimed that lowering insurance costs will not increase wages.

I am also not commenting on the merits or lack of merit in our current market-based system. I am only commenting on how it currently works.

I agree that there are a lot of other problems that must be fixed, somehow.

[TheKentuckian]

22. If wishes were fishes then we'd all cast our nets

You're relying on suply and demand to push this crap and we've seen those laws don't really work as theory and a short blip of past experience would lead one to believe.

Let me tell you what I know, about a year ago today the company I worked for had their biggest month ever after a series of biggest months ever. How were we rewarded? With a 30% paycut.

There is nothing in the law but the principle of supply and demand to keep compensation above minimum wage...NOTHING. If high or even moderate unemployment is maintained that supply and demand tripe never sees the light of day. I'm over faith based about anything.

I'm thinking plenty and it is preventing me from buying platitudes and free market theory at the moment.

[johnaries]

29. Again, I am not arguing the merits of the system.

You are correct, it is based simply on the principle of supply and demand. I'm not trying to defend it. I am just commenting on a single question within the context of the current supply and demand principle.

Is it right? No. I'm not arguing that.

[TheKentuckian]

37. My friend, within the current context the principle cannot be applied

that is the essential point.

I tell you what, you fix employment rules and representation as well as the economy, and probably the corporate culture and we can discuss the merits of the tax but until then you are presenting a hypothetical as a fact to bolster the case for something that will hurt workers if the fixes you admit are needed aren't there.

This ain't some econ textbook son, this is real life.

[Hello_Kitty]

11. That's nice but many union workers with the "Cadillac" plans work for the government

Either directly or for companies with gov't contracts. States like CA and AZ are so broke right now that the likelihood of plowing any savings back into wages is nil. Particularly since they are constitutionally obligated to balance their budgets. AFSCME and teachers unions are expected to be hardest hit by this excise tax. These workers have been subject to numerous lay-offs and those who remain have taken pay cuts and furloughs already. This excise tax is not going to translate into higher wages for them. Rather it means that they will get less health care for more out of pockets and poorer health outcomes.

[johnaries]

13. There are NO union workers who currently have "Cadillac plans".

No union workers currently have plans that meet the cost requirements of a "Cadillac" plan except for police and firefighters, and they are specifically exempted.

All of the hysteria is based on a portion of the CBO estimate that at some point in the future if the premiums continue to increase SOME workers' premiums will cross the $8500/23500 threshold. However, the threshold is tied to inflation increases, and the HCR bill is designed to lower preiums - or at least decrease the rate growth. So their conclusion is questionable. Further, if it does come about at some point in the future Congress can simply raise the threshold.

[Hello_Kitty]

14. LOL. First of all, you're wrong about no union members having those plans.

I personally know people who have them.

Second, what matters is not what people currently have, but what they'll have in 2016.

[johnaries]

17. Do they "perceive them" as Cadillac plans or are they actually

paying more than $8500/23500 annually? A lot of people THINK they have Cadillac plans but they don't actually qualify under the bill. According to Union records, only Police and Firefighting union members have plans that qualify.

And I already addressed 2016, if you read my post.

edit: dyslexic fingers.

[mtnester]

41. Funny, what about the support staff that support those police and firefighters and have the same pl

I am not exempt, my annual rate for a high deductible two person plan, counting the money that is put into my health savings account to pay for that over $5,000 deductible IS more than the cap. My employer will have to drop insurance...oh wait, they cannot because there are some laws on the books that state if they offer to one, they have to offer to all (the firefighters/cops, which is a contractual agreement as well). And now, I will be taxed on top of that for my "cadillac plan." Who is going to compensate me for that? The insurance fairy? And yes, we do Wellness, physical fitness, preventastive healthm drug free workplace,,,you name it we do it, and the rates STILL go up more than 30% annually. Annually...we have to, by law renew ANUALLY.

Meh, real word stuff is hard for people to understand, especially those inside the beltway.

[amandabeech]

18. You are so funny!

Your lines about employers actually increasing wages in today's economy--priceless!

Where do you come up with this stuff?

Really, you should be on Letterman.

[johnaries]

21. I am not talking about "today's" economy.

We need to fix the economy and the unemployment problem, first - as I have stated in other posts.

[inthebrain]

24. I don't know what planet you grew up on

but in the world of low wage work that I lived in for many year none of my employers gave a shit about turn over. As a matter of fact THEY WANTED IT. They figured the longer you were there the odds of you demnanding a raise increased. As a matter of fact, many of us didn't even bother to ask cause we knew we's be out the door within a week.

Most of these employers want workers who are easily exploited and kept in fear of asking for a wage increase.

A lot what you wrote is typical capitalist mythology they use to sell to workers.

[johnaries]

28. I did work for a company like you describe, once.

They are no longer in business, BTW.

They also didn't offer any benefits so this whole discusson doesn't apply, anyway.

As far as "capitalist mythology", I'm not arguing for or against the system - I'm just commenting on the way it works based on my own observations in regards to a specific question.

[dsc]

26. To compare a period where unemployment was 4% and lower

to one where it is 10% or more, is ridiculous. There is no way wages will go up in an economy that has 10% unemployment.

[johnaries]

30. That is a separate issue and is being addressed

separately.

[dsc]

31. there isn't a single, solitary economist of any persuasion

who envisions 4% unemployment during Obama's first term. Unless unemployment falls somewhere in that neighborhood it is hard to envision a real increase in wages.

[Clio the Leo]

27. Interesting read. Thank you. NT

[flyarm]

33. I think you are equating good faith on the part of the corporations, that just does not exist in

many cases, with many corporations.

My airline did not negotiate in good faith for 9 years..we went 9 years without a new contract..by the time all legal maneuvers were complete we were declaring a strike..when Bush ( the pres ) stepped into our negotiations and threatened to hold each of us accountable if we went out on strike and allow us to be indiviually and federally charged fines ..and replaced if we walked out ..using an antiquated law from the 1800's. It was very hostile..

We finally got a contract..but it was very ugly..and it usually is..that was July 2001...then after 9/11 the Union was forced to go back and make some drastic concessions..again to save jobs...and the company.

The contract before that 9 years ..the airline tried hiring scabs to take our jobs as they were locking us out.
( edit to add..i am making this simplistic in description, without all details as i would have to write a book here to add all the details)

And you honestly think the corporations in this economy are going to go back and renegotiate higher salaries in exchange for no health care? Or lower rates on health care?

I don't want to be rude..but what world are you in?

[lynne]

34. Lowering the cost of benefits will increase corporate PROFIT and that's all -

- anyone thinking it would increase wages is woefully naive and inexperienced regarding life in the corporate world .

[flyarm]

36. emptywheel had this posted that refutes the idea wages will go up..

emptywheel January 7th, 2010 at 9:09 pm
7
In response to WilliamOckham @ 1
Actually, the problem is much greater than that. People have repeatedly used Gruber’s work to support arguments that they don’t actually support (his only “proof” that the excise tax will raise wages is a study on how employers raise wages on non-fertile women after maternity care is mandated, and on that EVERYONE has based their claims).

xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx
and I have posted this from both emptywheel and Firedoglake..
xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx




Follow the Money: Your Tax Dollars Bought Jonathan Gruber’s Services
By: Rayne Sunday January 10, 2010 10:30 am http://seminal.firedoglake.com/diary/23174

Firedoglake has been researching the relationship of MIT economist Jonathan Gruber with the Obama administration with regard to health care reform. You’ll find posts by emptywheel, dday and Jon Walker about the apparent conflicts of interest on Gruber’s part, that of the Obama administration and the media covering health care reform.

We’re still looking at the money – yes, follow the money, as Deep Throat once said – paid out to Gruber by the government. OUR MONEY, our tax dollars, paid out to Gruber under three administrations. You can view the numbers at this link, at which you’ll find a published spreadsheet with all information compiled from USASpending.gov and NIH websites (links to sources at the end of this post).

But there are more questions after looking at the data; perhaps the answers are innocuous and amount to nothing, but it would certainly be nice to have some answers.

What permits Gruber to be offered “non-compete” contracts?

What does it mean that a substantive number of the contracts offered to Gruber were let under classification, “Available only for groups such as disabled persons, prisoners, and regulated utilities”?

Why does Gruber have two business identities documented by two DUNS numbers, one of which is a nonprofit entity?

Why are the 2009 contracts for HHS paid to the nonprofit?

Why are there so many fields with “invalid” content or no content where one would reasonably expect some information?

xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx

edit to add: please take the time to read the comments section..much is disclosed here that should make every American suspect to what is going on!

xxxxxxxxxxxxxxxxxxxxxxxxxxxx

Jonathan Gruber Failed to Disclose His $392,600 Contracts with HHS (Updated)
By: emptywheel Thursday January 7, 2010 8:35 pm
http://emptywheel.firedoglake.com/2010/01/07/jonathan-grubers-rent-a-scholarship/

MIT health economist Jonathan Gruber has been the go-to source that all the health care bill apologists point to to defend otherwise dubious arguments. But he has consistently failed to disclose that he has had a sole-source contract with the Department of Health and Human Services since June 19, 2009 to consult on the “President’s health reform proposal.”

He is one source for the claim that the excise tax will result in raises for workers (though his underlying study is in-apt to the excise tax question). He is the basis for the argument that the Senate bill reduces families’ risk–even if it remains totally unaffordable. Even Politico stenographer Mike Allen points to Gruber’s research.

But none of the references to Gruber I’ve seen have revealed that Gruber has a $297,600 contract with HHS to produce,

a technical memorandum on the estimated changes in health insurance coverage and associated costs and impacts to the government under alternative specifications of health system reform. The requirement includes developing estimates of various health reform proposals on health insurance coverage and cost. The alternative specifications to be considered will be derived from the President’s health reform proposal.

(h/t Mote Dai)

The President’s health reform proposal? But I thought this was the Senate’s health reform proposal?!?!? (wink!)

Now, HHS says they had to put Dr. Gruber in charge of evaluating health care reform proposals because he’s got,



go to link to read the rest!!!

but note in comments section..Emptywheels comment here:

emptywheel January 7th, 2010 at 9:09 pm
7
In response to WilliamOckham @ 1
Actually, the problem is much greater than that. People have repeatedly used Gruber’s work to support arguments that they don’t actually support (his only “proof” that the excise tax will raise wages is a study on how employers raise wages on non-fertile women after maternity care is mandated, and on that EVERYONE has based their claims).

So you have to ask–did a bunch of “intelligent” people just lose all their critical thinking skills? Or is someone feeding a bunch of other nominally independent “journalists” Gruber’s claims, and they’re publishing it for some reason or another?

xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx

[Romulox]

38. Absolutely not. Wages are set by supply and demand, not cost.

There is a surfeit of excess labor atm--workers are in no position to demand any raise.