Compensation Levels and Universal Healthcare

Greg Mankiw writes,

Employer-provided health insurance is just a form of compensation that happens to be provided in kind rather than in cash. What the Times seems to be saying is that because companies like General Motors have promised levels of compensation too large to make them competitive in the international marketplace, we should shift the responsibility for some of that compensation from the companies to the taxpayer.

An alternative approach is for the companies to reduce compensation to levels they can afford. One might respond that reduced compensation would be hard on workers. But so would the higher taxes needed to pay for the national health insurance the Times is lobbying for. There is no free lunch here.

But as Mankiw knows, the Times is advancing the idea that progressive taxes should be increased. And so the higher taxes would be less burdensome, in theory, than the reduced compensation. Mankiw’s post is intended as a critique of the “international competitiveness” framework. The irony is that his best bet would be to emphasize the virtues of a low-tax economy in delivering higher rates of growth.

(Not that this would be an unanswerable argument either.)