Yes, Republicans, job lock matters

Jeffrey Tucker Director of Content, Foundation for Economic Education
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Practically overnight and without warning, the D.C. pundit class is actually talking about a hugely important fact of modern life as it relates to health care. Yes, hard to believe, but true. The phrase in question is “job lock,” and it refers to the ways in which employer-provided health care ties workers to jobs they hate and massively reduces job mobility.

This has been a gigantic issue in job markets for more than half a century. It seriously compromises worker decision making. You know this just by chatting it up anyone you know who hates his or her job. Why not bail? If you are talking openly, eventually the issue of healthcare comes up. People are so grateful for this apparent perk that they will put up with abusive bosses, demeaning and dead-end jobs, and terrible coworkers, essentially ruining their own prospects for moving up in the world.

This is bad for absolutely everyone. You end up with a nation of sad sacks who dream of sticking it to the man should they ever muster the courage. It’s a bad deal for employers too, who don’t really relish being hated by those he or she pays to serve the business.

What employer-provided health care does is effectively give the employer more power over the employee than would otherwise exist. Ideally, it should be an even contract, a pure exchange of service for property. But with perks like health care in lieu of wages, the employer can engage in a subtle form of blackmail: if you leave, if you disobey, if you step out of line, you might find yourself back in the gutter in a job without benefits.

This is a tremendously terrifying prospect for millions, and it has made a mess of the free bargaining that should characterize the relationship between labor and capital. The irony is also intense. All these mandates came about in the name of granting employees more rights, and, truly, people are glad to get health care. But in real life, it doesn’t work this way. The more that wages are paid out in benefits, the more stuck the worker feels.

There are two ways out of job lock. The socialists want a single-payer solution in which government would just guarantee health care independent of the decisions of employers. Many European nations have this system which is also why those systems are not the font of consumer service, creativity, and innovation. On the other side, people like me favor blowing up the entire apparatus of mandates, subsidies, wage controls, and have a free market instead. That is really the best solution to the problem of job lock.

Regardless of your politics, it’s long past time we had some open talk about this. But first, the background to the latest argument. A Congressional Budget Office study has offered an inflammatory prediction in a report issued this week. It said that Obamacare will drive at least 2 million people out of the workforce.

Sounds terrible, right? Maybe. It’s true that the new mandates and expansive coverage makes health care for business more expensive. This discourages hiring for fear of bumping up against expensive mandates. It also drives up the costs for existing workers, making layoffs more likely. It also means that existing job holders are more likely to get their raises in the form of benefits rather than cash.

But hold on here a moment, say some Democrats. The news isn’t all bad. Obamacare is succeeding in creating more alternatives outside of employer-provided healthcare. This means that workers do not feel as attached to their jobs, holding on for dear life for fear of losing benefits. The people who are leaving the workforce are doing so because they want to and can, and Obamacare provides that opportunity.

A compelling point? Maybe. But there is a problem with that version of events. Unless your income is low and you benefit from direct subsidies, the costs of private provision of healthcare insurance is higher today that it was before Obamacare went into effect. Millions of people who already held privately provided plans saw their premiums soar or their plans cancelled outright. Obamacare, with its preposterous wish-list of every imaginable malady gaining full coverage, has made private health care less available.

If you hate job lock, in other words, and you should, Obamacare takes us in exactly the wrong direction. What we really need is absolute commercial freedom in the private health care industry. There should be plans with full coverage. There should be plans that provide only catastrophic care. Premiums should be permitted to discriminate based on lifestyle and health — and, yes, take account of preexisting conditions.

Imagine if you had a real marketplace for healthcare coverage. You might pay a small subscription fee of $10 per month and face high fees for routine care and only full coverage for the least-likely catastrophic events. This would be amazing because doctors and hospitals would be incentivized to keep costs low and consumers would actually start paying attention to prices.

You might also have over-the-top plans that run in the thousands per month, and that’s great too. We should shop for plans the way we shop for food and cars — without any government mandates on what is permitted to be offered by insurers. Every manner of quality and price should be available. This is what a real market would look like — and it is very far from the fake market set up by Obamacare, which is not working.

This whole job-tied insurance racket came about during World War II’s wage controls. Large corporations wanted to pay wages but weren’t allowed to because of federal controls. So the only way out was to start providing benefits instead — a far less valuable solution for workers and one that gives inordinate power to capital over labor. Step by step this became the norm.

There are other costs to this system as well. Because only the larger employers can really afford the mandates, they are able to use the system to harm smaller upstarts who fear growing from small to medium because of the high costs. In this way, employer provided plans ended up cartelizing and corporatizing the economic landscape in ways that take us ever farther away from a free and competitive system.

So by all means, let’s talk about job lock. It is huge issue. The only way to end it is to put a complete end to Obamacare’s shoddy attempt to centrally plan competition and embrace authentic health care freedom.