Universal Health Care Would Boost Entrepreneurship
I’m the sort of person who’s prone to saying that we could have a more entrepreneurial economy in the United States if we had a universal health care system. The thinking is that our current system unduly punishes risk-taking. There are a lot of different aspects of this, but basically the American health care system both produces labor market rigidities (”job lock”) and makes jobs at small firms relatively unattractive. But do I have any actual evidence of this? Well, not really. I think theory alone can establish that the effect should be there, but how big is it? Fortunately, Jonathan Gruber has some new data:
Over the past fifteen years, dozens of studies have documented the detrimental impact that job lock has on the economy. These studies typically compare the mobility of workers who are at firms with insurance but do not have an alternative source of coverage (such as spousal insurance or COBRA continuation coverage) to those who do have an alternative source of coverage should they leave the firm. The studies find that mobility is much higher when workers do not have to fear losing coverage; job-to-job mobility is estimated to increase by as much as 25 percent when alternative group coverage is available. [...]
There are fewer direct studies of the impact of job lock on entrepreneurship. But the most convincing research, by Alison Wellington, mirrors the findings of other job mobility studies: Americans who have an alternative source of health insurance, such as a spouse’s coverage, are much more likely to be self-employed than those who don’t. Wellington estimates that universal health care would therefore likely increase the share of workers who are self-employed (currently about 10 percent of the workforce) by another 2 percent or more. A system that provides universal access to health insurance coverage, then, is far more likely to promote entrepreneurship than one in which would-be innovators remain tied to corporate cubicles for fear of losing their family’s access to affordable health care. Indeed, even the Galtians among us should be celebrating the expanded potential for individual enterprise once the chains tying them to a job that provides insurance have been broken.
I would add that when you really get down to the issue of starting a successful new business, there should be interaction effects here. Job lock discourages people from taking new jobs. And it also discourages people from starting new businesses. But the fact that people are being discouraged from taking new jobs also makes it harder to start or expand new businesses.
And it’s worth saying that there are other benefits to flexibility besides these kind of narrowly business-oriented ones. The same things that make it harder for someone to start a new business also make it harder for someone to say they’re going to work a few years, pay off loans and save up some money, and then go travel somewhere or study something that’s of interest to them. Similarly, Canada’s health care system is a great blessing to someone who might want to try to subsist on a part-time job while dedicating the bulk of his energy to his band (to be sure, a form of entrepreneurship) and this perhaps accounts for Canada’s disproportionate production of indie rock.
42 Responses to “Universal Health Care Would Boost Entrepreneurship”
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May 28th, 2009 at 2:31 pm
THANK YOU! It is about time somebody posted this up. If a public options frees the mess of health care off the backs of small businesses, let’s do it. Hell, I’m pretty sure larger businesses would love to not have to negotiate with insurance companies for their employees benefits. Basically, there’s a lot to be gained by a public plan but those who benefit from the system now are the bastards who want to stop this at all costs.
May 28th, 2009 at 2:35 pm
I once read a Rolling Stone article about Swedish pop music that took it as a given that the reason there are so many Swedish bands is Sweden’s welfare state allows Swedish teens to bum around and start bands. This has resulted in Roxette and Ace of Base, but also the Hives and I’m From Barcelona.
Could “The Sign” be the number one argument against government health care?
May 28th, 2009 at 2:39 pm
Anon,
I think big business likes the current system because it gives them an advantage vs small business, basically big business wants to be totally free to lay off people when they choose but have employees feeling locked in and not leaving for better opportunities.
May 28th, 2009 at 2:45 pm
Yet another example of how a functioning social safety net facilitates social mobility. If the risks you’re taking in business don’t endanger your children’s health care, you’re more likely to take them.
And now for the other side.
[ahem]
SOCIALISM!!!
May 28th, 2009 at 2:48 pm
Good point, Eric K.
Yeah, I’d so take Ashlee Simpson or New Kids on the Block over Ace of Base.
May 28th, 2009 at 2:49 pm
In fact, the difference between Ace of Base and I’m From Barcelona is almost microscopic, although IFB clearly surprised everyone by coming out with an even stupider name for their group.
you are depressing me into thinking that perhaps the welfare state is bad for music.
good for health care, though. how to choose?
how to choose?
May 28th, 2009 at 2:53 pm
I’m not sure that the best selling point for universal health care is that fact that it allows some people to slack off and not work while others pay taxes for their health care.
May 28th, 2009 at 2:54 pm
Kind of a subset of the entrepreneur angle, but our health care system is also a major factor in the disappearance of small farms, which are essentially small businesses. I wonder if Canada has more small farms per capita than the US.
May 28th, 2009 at 2:55 pm
I’m not sure that the best selling point for universal health care is that fact that it allows some people to slack off and not work while others pay taxes for their health care.
Good thing that’s not the point being made here.
May 28th, 2009 at 2:55 pm
I see people have beaten me to the obvious joke. Do we really want to encourage the production of indie rock? But seriously, this is an interesting point.
May 28th, 2009 at 3:02 pm
This is a feature, not a bug.
May 28th, 2009 at 3:15 pm
you are depressing me into thinking that perhaps the welfare state is bad for music
Misery’s great for the arts in a lot of ways.
__________________________
I do remember the ‘job lock’ issue giving me an evasive advantage once:
Boss: So, do you think Jen will be coming back after her maternity leave? (this is a loaded question, because everyone knows she not only doesn’t want to come back, she had in the past expressed interest in pregnancy primarily as an excuse to quit)
Me: Honestly, I don’t know.
Boss: Hmm.
Me: …but her husband’s self-employed and she’s carrying their insurance.
Boss: Ah, good point.
That said, of course it would free a lot of us up. I can think of several times I would have made riskier, yet potentially more satisfying and/or lucrative, job choices had I not worried about lacking health benefits.
May 28th, 2009 at 3:15 pm
The question is: does this benefit outweigh the cost of the fiscal mess UHC is going to create?
May 28th, 2009 at 3:21 pm
I’m a perfect example. Small business, around a million a half a year in revenue. 45 contractors but only 2-3 full time salaried employees. Every time I have to hire a new employee, I have to say to them, sorry we have no health care plan. I’ll give you a stipend, but you have to go out an purchase it individually like I do. I always see them calculating the risks to their family in their head. I know I’ve had some good people pass on working for me for this very reason.
May 28th, 2009 at 3:32 pm
I like how Matt takes a concept proposed by Libertarians (having health insurance independent of jobs to increase job mobility), as a rational for government insurance.
The benefits are not caused by government ownership, they are caused by decoupling our jobs from insurance.
May 28th, 2009 at 3:34 pm
The only reason anyone gets health insuranec through their job, is that getting it through one’s job is a widely used tax avoidance scheme. Change the tax law so getting it through one’s job didn’t avoid income taxes, FICA and Medicare tax, and no employer would offer it, since no one would want it, they’d take money instead.
May 28th, 2009 at 3:52 pm
I suppose I should point out that the real benefit of employer-based insurance has far less to do with taxes than with the far greater security of group insurance– the insurers have very few opportunities to kick individuals off the rolls when they want to keep the group’s business (think of it as a sort of collective-bargaining alliance, if you want). An individual policy… well, they can boot you for pretty much any reason, or no reason at all. All that rugged, savvy Randian individualism isn’t going to count for much when a series of insurers decide they don’t like your equally rugged motorcycling hobby and its attendant risks.
May 28th, 2009 at 3:55 pm
Health care and entrepenuirs:
I was starting a business about 6 years ago. Had to decide between getting health care for myself (my former wife carried it for the kids) or hire someone.
Heck, I’d had a pretty good heart workup a year before.
My heart attack essentially wiped me out – out of business and out of much of what I owned.
May 28th, 2009 at 3:58 pm
That’s an interesting thought about healthcare and Canadian indie music. The next time I’m talking with American visitors and they ask what’s the deal with all the outstanding indie music coming out of Canada I have an easy answer to toss out.
May 28th, 2009 at 4:00 pm
Same point applies to not encouraging home ownership over renting. That encouragenent made sense a generation ago when there were fewer vehicles for lifetime asset accumulation, but with 401K’s that no longer the case.
May 28th, 2009 at 4:20 pm
j mct, you are an idiot who knows nothing about health insurance.
May 28th, 2009 at 4:33 pm
@RJWalker above –
So basically because of your heart attack, you ended up paying something on the order of $50K just to cover the medical bills right?
What middle class person has that kind of money lying around? Oh! I know! Bill O’Reilly!
This what the heath insurance/health care industry needs to realize – that most Americans can’t afford to have a health emergency without turning it into a financial one.
May 28th, 2009 at 4:39 pm
It’s important to note, and I haven’t seen you put this forward, Matt, is that a significant part of the opposition to health care reform comes out of wanting to maintain the situation you describe. “Job lock” and disincentives for entrepreneurs are both actively beneficial to large established employers.
May 28th, 2009 at 5:20 pm
eric k and anon…
or for big business to force employees to sign non-compete clauses in employment contracts…not health related, but it would be nice to be sure that the x years you’ve spent in industry y aren’t completely useless for the next 1-2 years after they let you go.
May 28th, 2009 at 5:46 pm
adrock,
I think unless you are blatantly doing something (like a sales rep taking customer lists with him) most noncompete clauses aren’t worth enforcing and below a pretty high level of employee rarely are, look at high tech, people move between companies all the time
May 28th, 2009 at 6:16 pm
Re: big business wants to be totally free to lay off people when they choose but have employees feeling locked in and not leaving for better opportunities.
Since 1996’s HIPAA law lets people transfer to new jobs and qualify for the new employers insurance plan irregardless of pre-existing health problems, job lock really doesn’t keep people stuck working for one employer. As long as the employee is just transferring between comparable health plans s/he is protected from discrmination. True, it does tend to lock in people with health problems to certain types of jobs, but not to a single employer. So businesses have lost that benefit of providing health benefits to employees.
Re: The question is: does this benefit outweigh the cost of the fiscal mess UHC is going to create?
Health costs are going to go up whether we have UHC or not. So if we’re in for a fiscal mess with UHC, we’re going to have the same mess (possibly worse) without it. Rightwingers seem to have this bizarre idea that people without health coverage just curl up and die when they get sick. No, it doesn’t work that way. Uninsured sick people do get healthcare. If they get really, really sick they end up on public health insurance anyway. Otherwise (”there is no such thing as an unpaid bill”) their unpaid bills are transferred to the rest of us. We will NOT be saving any money or sparing the economy a hit if we fail to reform healthcare.
Re: the insurers have very few opportunities to kick individuals off the rolls when they want to keep the group’s business
Um, legally they can’t. Group insurance does have two big benefits: risk pooling, and negotiation. The former I think is well-known, but equally important is the fact that a large employer has clout in neogtiating with insurers to keep premiums low, and HR benefits people can go to bat for you if a workplace insurer is screwing you over in ways that are contrary to the group contract. However, I don’t see why we have to have workplace groups– we could base group coverage on any suitably random factor, like the letter of your last name or the month of your birth.
Re: “Job lock” and disincentives for entrepreneurs are both actively beneficial to large established employers.
As I pointed out above, job lock really doesn’t exist any longer, at least not in terms of keeping people working for a single employer.
May 28th, 2009 at 6:57 pm
Risk pooling is a bullshit explanation for why jobs provide health care. Insurance IS risk pooling. Risk Pooling a risk pool. Only liberals would come up with this retarded roundabout explanation.
May 28th, 2009 at 7:01 pm
I’m all for universal coverage, but the truth is the only reason my wife and I have health insurance is because we own our own business. Before we started our company, we had both been denied coverage for pre-existing conditions (a huge flaw in our current system that no amount of rugged individuality can overcome). When our business took out a group health insurance policy, voila, we were both covered since with group policies they don’t screen for pre-existing conditions.
May 28th, 2009 at 7:19 pm
This is why one of the great (mostly) unused rhetorical tacks of universal health insurance should have been that establishing health care for all would protect that most American of rights: the right to tell your boss to shove it.
May 28th, 2009 at 8:00 pm
Sigh… insurance is a risk pool that spreads the insurer’s costs among many, but that certainly doesn’t translate into any particular benefit for individuals not included in the smaller groups that make up the giant risk pool, because they don’t have adequate bargaining power.
May 28th, 2009 at 8:44 pm
[...] now the second thing that caught my eye. Over at Think Progress, Matthew Yglesias has a great post about how our current health care system limits the amount of innovation and entrepreneurship in [...]
May 28th, 2009 at 10:15 pm
Re: Risk pooling is a bullshit explanation for why jobs provide health care.
Your post is incoherent, or at best shows total ignorance of how health insurance works. If you belong to a group (generally an employer group) your risk is pooled with everyone who has insurance through that employer. If you have an individual policy, there is no risk pool: you are it. One of the potential reforms on the table will be to force insurers to treat all insureds (or at least all individual subscribers) as members of the same risk pool so that they will all be charged the same premium as they do with people in a group policy.
May 28th, 2009 at 11:04 pm
Bush’s last major health care proposal was to decouple health insurance from employment by changing how health care is taxed. I.e., Matt’s pretending that the only way to decouple is to have universal insurance. Not true.
Of course, Matt has no interest in entrepreneurship anyway. He wants universal health care, and is looking for arguments, no matter how misleading they may be.
May 29th, 2009 at 12:13 am
You assume pooling risk with other individuals is a favorable outcome. This is like someone who owns a house on the coast pooling their risk with their neighbor. That’s great, except when your neighbors house isn’t on stilts or built with nearly the same standards as yours. Your house survives the hurricane fine, his is destroyed, and your premiums double.
Insurance is designed to average an individuals expected cost over a long term. Not pool the risk for a bunch of unhealthy people with healthy people. This is the incentive problem those knuckle dragging republotards keep bringing up that you keep ignoring. It’s amazing how Liberals will completely ignore the merits of evolution except when it comes to what is taught in schools.
May 29th, 2009 at 6:43 am
Re: You assume pooling risk with other individuals is a favorable outcome.
If it isn’t a favorable outcome then why do we have insurance in the first place?
Re: Insurance is designed to average an individuals expected cost over a long term.
No it isn’t. Insurance is designed to amortize expensive events that individuals cannot pay for themselves over a large group of people. It is inherently socialistic. Back in 1986 I bought a new car; five weeks later someone else ran a stoplight and hit me and totaled the car out. I had paid only two payments on my insurance policy, yet the insurance company paid the full value of the car. In your system my payment would have been limited to those two premium payments. In the real world the money for my paymen tcame from the whole subscriber base. That is how insurance works.
Re: This is the incentive problem
?????
Are you saying insurance gives people an incentive to get sick? In what alternate reality? The money from health insurance does not go to the individual so it’s hard to see where such incentive would come in. As a general rule, insurance pay-outs are based on the types of events (illness, property loss, death, etc.) that are inherently undesirable so no one has an incentive to have those events occur. (There may be an incentive to fake them to gain a fraudulent payment, but that’s not the issue here)
Re: It’s amazing how Liberals will completely ignore the merits of evolution except when it comes to what is taught in schools.
Liberals (indeed, any sane person) reject Social Darwinism for much the same reason they reject Naziiam, slavery, absolute monarchy and other evils of that sort. Nothing to do with biology. It’s called morality– something Republicans love to prattle about except when it comes time to pay the bill.
May 29th, 2009 at 9:13 am
[...] Yglesias muses that in fact, universal health care would boost entrepreneurship: I’m the sort of person who’s prone to saying that we could have a more entrepreneurial economy [...]
May 29th, 2009 at 9:29 am
If you were a corporate CEO, would you not want to get paying healthcare premiums off your back to boost your share price, competitiveness, and the value of your stock options? The bottom line would benefit a lot from a tax-funded public plan.
So why are the monkeys at the Chamber of Commerce, et. al., clinging to employer-based ideology?
May 29th, 2009 at 2:48 pm
[...] Read the rest… [...]
May 29th, 2009 at 3:56 pm
[...] Universal Health Care Would Boost Entrepreneurship [...]
May 29th, 2009 at 8:18 pm
You are simply wrong. More expensive houses have more expensive insurance. More expensive cars have more expensive insurance. Insurance is designed to average your expected cost over the ownership period of the thing being insured + a little extra for the agent and right to use capital if required. Doing this with many people makes the situation easier to manage but this has nothing to do with the purpose of insurance.
Yes. If the government forces me to buy milk insurance that cost $120 a month, but gives me the right to buy milk for 10 cents, I will use more milk. As a rule, insurance premiums are heavily based on activities and levels of health of individuals. Try getting cheap health insurance while smoking and being 200 pounds overweight.
Ahh, the morality argument, which falls flat on it’s face reading basic history. It was those same liberals who argued for state mandated sterilization of prisoners 70 years ago.
May 30th, 2009 at 11:07 am
Re: More expensive houses have more expensive insurance. More expensive cars have more expensive insurance.
Yes, that is true. But there is no such thing as a “more expensive” human beings. All humans are of equal worth and value. That is a fundamental definition of humankind upon which all morality and all politics rests. Attempts to violate that postualte have led to ghastly and disastrous consequences in the past (see: slavery, Auschwitz, etc. etc.) So when we are insuring humans themselves (not their property or their income) premiums should be absolutely equal across all human beings.
Re: If the government forces me to buy milk insurance that cost $120 a month, but gives me the right to buy milk for 10 cents, I will use more milk.
Well maybe, because milk is a “good”– though it has limited shelf life and there are limits to its consumption so you would not by an infinite amount of it even if it were free. Healthcare is not even a “good”; it is “bad”, and most people prefer to avoid it naturally. Other than a few neurotics they only comsume it when circumstances compel them to. Those circumstances are independent of monetary factors (bacteria, viruses, malfunctioning genes, and accidental events are not conscious of money in any way). If you think otherwise then your view of reality is so bizarre that it makes Young Earth Creationism look like rational theory.
Re: It was those same liberals who argued for state mandated sterilization of prisoners 70 years ago.
If you think that people who were alive and presumably of mature age 70 years ago are still alive today in any but the most trivial numbers then you really are in Cloud Cookoo Land. For the record I am 42, and have only been a member of the voting electorate since 1985. Simple logic (if not also simple courtesy) dictates that you not pin the sins of the past on me from before I was born. Good grief.
May 30th, 2009 at 11:33 pm
Really? You don’t think some people are more expensive to insure? You don’t think this expense is partly their own fault? Talk about bizarre views.