What is blindingly obvious to employers but apparently invisible to the average zero-business-experience mainstream pundit is this: if you want to fix the economy, you must first fix healthcare. If you want to pinpoint a primary reason why U.S. enterprises shift jobs overseas, you have to start with skyrocketing healthcare costs.
According to a report by the St. Louis Federal Reserve, real (adjusted for official inflation) wages have risen a mere 3% since 1970. (No wonder wage earners don’t feel wealthier; if we use a more realistic measure of inflation, we haven’t gained 3%–we’ve lost ground.)
But if we look at total compensation costs paid by the employer (health insurance, workers’ compensation, employer’s share of Social Security, etc.) we find that these costs have soared 60%. In other words, if these labor overhead costs had remained stable (i.e. gone up only as much as inflation), employers could have distributed raises of 60%.
These labor overhead costs are the reason why wages have been stagnant for 46 years, and the dominant overhead expense is healthcare insurance. Why has healthcare soared from 6% of GDP to 18% in four decades?
One reason is we have the worst of all possible worlds:
Here’s a two-word summary of why the American healthcare system is fundamentally broken and cannot be fixed with policy tweaks: perverse incentives.
If you type sickcare in the custom search box on this site, you get 10+ pages of articles. I have covered healthcare/sickcare in depth for many years. I have many correspondents within the sector (doctors and nurses), and have paid the unsubsidized costs of insurance as an employer or as a self-employed worker for 30+ years.
Here are two charts and three stories of many I’ve published over the years:
The jobs report has little value if we don’t peer beneath the glossy veneer.
On the surface, last week’s jobs report was glossy good news: the U.S. economy added 288,000 non-farm jobs. Beneath the glossy veneer, however, the news wasn’t quite as good as advertised: full-time jobs declined by 523,000 and part-time jobs surged 840,000.
Courtesy of Zero Hedge, here’s a chart depicting the entire job market:
Sickcare/ObamaCare is fundamentally broken at every level.
The incremental nature of change makes it difficult for us to notice how systems that once worked well with modest costs have transmogrified into broken systems that cost a fortune. Exhibit # 1 is higher education: 40 years ago, four-year public universities were affordable and two-year community colleges were almost free. Now students have to borrow $1 trillion to pay for the exorbitant privilege of higher education.
Longtime correspondent Ishabaka (an M.D. with 30+ years experience in primary care and as an emergency room physician) responded to this article with an insider’s account of what happens when greed and cartels take over healthcare.After reading What’s wrong with American hospitals?, a scathing deconstruction of for-profit healthcare, Ishabaka submitted this commentary:
I could have told you what was wrong with our hospital system by 1989 – nobody would listen to me back then.
It is not coincidence that these two unofficial taxes–healthcare and college tuition–are soaring in cost, outpacing all other household expenses.
I have long argued that to make an apples-to-apples comparison of real tax rates in the U.S. and other equivalently developed advanced democracies, we have to include two enormous expenses that are funded by the central state in countries such as Denmark and France: healthcare and college tuition/fees.
In The Real-World Middle Class Tax Rate: 75% (July 5, 2012), I estimated that healthcare insurance (if paid out of gross income, as we self-employed workers do) in the U.S. is roughly equivalent to a 15% tax.
Now that the Orwellian-named Affordable Care Act (ACA) is raising costs and deductibles, the true cost of healthcare (a.k.a. sickcare, because being chronically sick is so darned profitable for the cartels) is more like 20% in America.
Correspondent Tim L. (whose daughter is attending a prestigious STEM–science, technology, engineering, math–university) recently called $40-$50,000 per year college tuition what it really is: a tax:
Tagged with: cartels
, college tuition
, debt servitude
, Federal Reserve
, higher education
, middle class
, morally bankrupt
, Scandinavian tax rates
, unofficial taxes
, wealth inequality