Health Benefits Emerge as Focal Point for Unions, Management
UCLA Professor Sanford Jacoby began following labor issues 25 years ago while studying for his economics degree at the University of California at Berkeley. Jacoby has written four books, including “Modern Manors,” which studied the evolution of the country’s employer-sponsored health care system.
Question: There’s been relative labor peace in L.A. in recent years. Why are these strikes happening now?
Answer: The flash point is health care costs and that’s not just a Southern California issue. Health care costs for employers are soaring and traditionally, unionized workers have had very good health care benefits. So the costs for these unionized employers are going up even faster than the national average.
Q: What’s causing this?
A: Partly it’s health care treatments. They’ve become more expensive. People want the best-quality health care treatments, and that involves increasingly costly technology and drugs. This is probably the one area where the employer has control. The employers are saying, “Well, if our employees used less health care and we forced them to pay more of the costs, we would be better able to control it.” The theory is that if employees don’t pay for their health care costs, they view it as a free good and they overuse it. If they pay more for it, they’ll be more conscientious users.
Q: Traditionally the supermarket workers and the MTA mechanics have paid little of those costs. Are they going to pay more?
A: They’ll have to make some compromise and one of the unions has already agreed to substantially raise the co-pay. But the question remains if that’s enough to cover the gap. Getting them to pay more is a good idea in theory. But there are other forces driving up health care costs that cannot be solved entirely through collective bargaining.
Q: Such as?
A: Part of it is that the insurers have some pricing power right now and they have been jacking up the rates that they are charging employers. Employers have fewer and fewer choices on who they can negotiate these plans with and single employers don’t have a lot of bargaining power. Some are self-insured, but even they have an insurance company standing behind them. The other part is the 45 million people who are uninsured in the United States. Yet they use health care, they use hospitals and emergency rooms. They can’t afford to fully pay and that drives up health care costs for the insured.
Q: Why isn’t pay as much of an issue in these strikes?
A: A dollar of health benefits is worth more than a dollar of pay. They’re not offered by all employers and if you have a family, they’re vital. They’re tax-free, so they have a value beyond the cost to the employer. The availability and tax privilege makes the benefits very special.
Q: So what does that mean for both workers and employees?
A: The short-term solution to these strikes will be some reallocation of the burden shared by the employer and the employee. It’s going to be a temporary fix because there are a whole slew of other costs that are just not going to be controlled by bargaining between employers and employees.
Q: And the long term?
A: You have to take a high-altitude look at this and ask yourself, “Why is it that employers are in the business of providing health care to their employees, which is essentially what they are doing? How did we ever get into this situation?” We’re the only country that structures itself around an employer-provided health care system. I’m not sure it’s tenable in the long run.
Q: Why was our health care system set up this way?
A: Employers said, “We can do a better job of providing health care than governments can do.” They wanted to do right by their employees, get some credit for it, get some loyalty. What made it advantageous was the tax advantages for the employees. But the nature of health care and the nature of competition have changed.
A: The work force aged and that’s pushing up healthcare costs. Health care technology has become more expensive because of these capital-intensive treatments and there’s more competition with some employers who don’t provide them.
Q: The supermarkets are arguing that competition from Wal-Mart will hurt their business. Is that a legitimate argument?
A: It’s very hard for me to know where the truth lies. On the one hand, supermarkets say non-union competitors like Wal-Mart are a big threat because they pay lousy benefits. On the other hand, the unions say that’s not true, that’s not the issue. There is no great competition from Wal-Mart and they’re making fat profits that can be used to help us. But labor will admit that non-union companies do make it harder because they don’t pay union-style benefits.
Q: The cashiers and baggers on strike seem to get more sympathy from the public than the MTA mechanics. Why?
A: The mechanics have not made their case to the public as clearly as the food and commercial workers have. They have several PR issues. They are reasonably well-paid. Maybe not as well as other mechanics, but they are well-paid for blue-collar employees. They’re also public sector employees, so people feel they’re coming to them for a bailout.
Q: And most people in L.A. don’t use public transportation.
A: The middle class who drive are affected. They saw how bad traffic was at night and they know it’s because of the strike. It does affect middle class people, but not in a way that builds sympathy for the mechanics. If they could prove that getting better health benefits for themselves would improve health benefits for the uninsured, they would build more support. But they haven’t.