Schizophrenic about Unions and Health Care

Michigan became the 24th state to establish a right to work without joining a union the other day. It’s provoked considerable discussion and debate.

I can understand why some people might be on one side or the other. What I don’t understand is how someone can support labor monopolies to obtain above-market wages in every other industry but favor government using its buying power to obtain below-market wages for everyone who works in health care.

Who holds these bizarre views? The New York Times editorial page, for one. Paul Krugman, for another. Ezra Klein. And a whole slew of others on the left.

As I wrote at Townhall last weekend, a labor union is an attempt to monopolize the supply of labor to one or more employers. The goal is to obtain above-market wages. This is almost an impossible task without private and public coercion. Without the threat of violence or without government interference, employers faced with above market wage demands will hire workers who aren’t in the union (“scabs”). Incidentally, historically the people not in the unions were disproportionately minorities and women.

Let’s suppose you think these labor monopolies are okay. Does it make any sense to take the opposite view in health care? The health care sector employs about 16 million people, or about one of every 10 workers in the economy. Only 780,000 of them are practicing doctors. The rest are nurses, paramedics, clerical workers, etc.

One of the arguments for single payer national health insurance is that if government is the only payer, it can use its bargain power to suppress heath care wages. Just as a monopolist can charge above-market prices, a monopsonist (single buyer) can pay below-market prices (or in this case, wages.) Paul Krugman, for example, thinks this is what Medicaid does and he is just fine with it. He would prefer to see the government suppress provider fees on behalf of all patients. Yet he also supports unions in every other sector of the economy. What does he have against nurses?

The New York Times editorial page is also fine with the idea that ObamaCare cuts to Medicare are going to come at the expense of health care workers. Yet the very same editorial page is incensed that Michigan passed a right to work law on the grounds that it might lower the wages of auto workers.  Tell us, please, why auto workers are so much more deserving than paramedics?

The Affordable Care Act will reduce Medicare spending by $716 billion over the next 10 years. As Barack Obama and the congressional Democrats have said over and over again, this will not harm seniors. I don’t agree. Neither does the Medicare Chief Actuary. But let’s suppose for moment that the Democrats are correct. What would that mean? It would mean that the government would be using its monopsonistic buying power to suppress provider incomes.

Now for regular readers of The New York Times, you know that the paper thinks the ObamaCare suppression of provider fees is just hunky dory. So does Paul Krugman. So do almost all the commentators on the Left.

Go figure.


Can a union shop and right to work survive in different states in a largely free market economy? Matt Yglesias points out that the movement of labor and capital will tend to undermine union-based production, and adds:

Matthew Kahn and Erin Mansur, for example, have pretty compelling research showing that when you look at the boundary between two states with different rules in this regard that firms tend to cluster jobs on the union-hostile side of the border.

What is the right public policy toward unions? JD Tuccille argues that right to work laws interfere with the free market. I believe that Milton Friedman once made a similar argument. Tuccille quotes Gary Chartier, writing in the Freeman:

When a legislature interferes with voluntary employment contracts, it infringes people’s freedom to bargain with their own labor and possessions. Treating this kind of interference as acceptable means licensing arbitrary interventions into the market by politicians, who are ill-equipped to second-guess the decisions made by the real people making work agreements with one another.

But this ignores the fact that unions derive all their power from the ability to coerce. Without labor monopolies, right to work would be an irrelevant issue.

Postscript: See David Hendersonon the economics of right to work laws and the comments.

Comments (15)

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  1. Earl Grinols says:

    It is amusing to consider the inconsistency of blind support for both monopsony and monopoly without regard for the degree of competitivity of the relevat market, and that as long as Paul Krugman writes for the general public you will always have material. I like this one particularly

  2. Casey Quinlan (@MightyCasey) says:

    I’m with you on the hypocrisy that the union movement has become. However, I don’t think we’ve created a universe – at least, we haven’t yet – where individual workers are fully able to negotiate for pay. Some sectors and job descriptions do, many don’t. Adding basic econ and negotiating skills to K-12 education would be a step in the right direction, I think.

    One of the root causes of what you’re arguing against here is the tie between employment and healthcare access due to employer-insurance model. If we break that chain, and move toward a roll-your-own, with consumers responsible for buying their own health insurance and employers able to help their employees build their HSA balances via payroll deductions and wellness incentives. Changing the HSA laws to allow for h/c insurance premiums to be paid from those accounts *while employed* would be necessary, but certainly doable.

  3. Thomas says:

    Such a crucial note. Krugman’s commentary so often dwelves within a temporary solution without regard for the long run. Inconsistencies like this really show how he glosses over contradictory aims.

  4. Ken says:

    Maybe they never mastered the syllogism.

  5. Neil Caffrey says:

    I for one, have given up any semblence of hope for the op-ed/editorial pages in the New York Times. The views of the authors seem to be more concerned with illogical, partisan bickering, than thoughtful ideas.

  6. Mae says:

    We need an equal balance to the labor market.

  7. Studebaker says:

    Unions fund Democrats so politicians are willing to back their cause. Basically, in Political Economy, this is an issue where the costs are highly diffused while the benefits are highly concentrated. The same problem exists where Republicans (and Democrats) are willing to give big subsidies to corporations or farmers because the groups at risk of getting kicked off the Gravy Train are more vocal than the highly diffused victims who pay the cost.

  8. Sean Parnell says:

    One of the basic problems with most health care reform discussions, particularly of the statist/liberal variety, is that it eventually gets around to simply picking which government endorsed, created, or run oligopoly/oligopsony/monopoly/monoposony will achieve their desired goal. And while Goodman is unquestionably correct about Krugman et. al. favoring monopsony power of government when it comes to health wages, does anybody really think this applies to unionized nurses? I’m guessing when it comes time to decide which health care workers get their pay cut, it won’t be nurses looking at cuts.

  9. Larry Wedekind says:

    This is a well timed and very insightful post. Congrats on portraying the dichotomy,hipocrisy and inconsistencies so often espoused by the liberal mindset. FYI, I am already observing a downward trend in nursing salaries as a result of the PPACA. The Fiscal Cliff related tax increases and Medicare Advantage revenue decreases that are sure to come next year have also caused me to pull back on hiring and I am seriously considering how I can decrease my salary cost each month as a result.

    Healthcare Providers including hospitals are scrambling to find ways to counter the additional revenue decreases scheduled to go into effect next year. We will experience drastic unemployment in the healthcare sector as a result of the PPACA and the Fiscal Cliff negotiations. Regrettably, the answers to our Cost Crisis in healthcare are easily solved without the drastic cuts in Provider fees and without the cuts in beneficiary benefits mandated by the PPACA, but no one on the Left side of the aisle is listening.

  10. Frank Timmins says:

    It seems inconceivable that Milton Friedman would agree with JD Tuccille’s logic as quoted above, at least in the context of the reality of today’s union laws.

    He states that “When a legislature interferes with voluntary employment contracts, it infringes people’s freedom to bargain with their own labor and possessions.” Doesn’t “Right to work” legislation actually counter and correct previous legislation that gave unions the power to dictate the circumstances allowing the “employment” of people seeking jobs?

    If Friedman’s comment were addressing the original Taft Hartley legislation it might make sense, but it is hard to believe that a free market proponent would not believe in the rights of workers to individually negotiate for wages.

  11. wanda j. Jones says:

    Gentles, All…

    In healthdare, the union power is augmented by power conferred by state professional licensure. Designed to create “high hurdlea’ for newcomers so that job opportunities are not diluted, licensure is an absolute requirement for a set of healthcare jobs, both patient care and care admistration (case management, counseling, and others. This alone keeps wages high, as there are seldom a large list of people seeking certain jobs. Under-supplied in some areas are surgery techs,MRI techs, insurer case management,and mental health counselors–and a long list of others.

    While we think of healthcare unions as usually non-professional, (food service, laundry, security…) one of the most powerful unions is one that is undoubtedly professional. I speak of Nursing, where their power is now both in determining professional staffing (California now has a staffing ratio, not based on acuity, as is the ANA, but on a straight hourly ratio to numbers of patients.

    We are at the take-off point for many changes in nurse specialization, including a DrNP (Doctor of Nursing Practice) clinical program management, and even “Revenue Recovery” to fight the incredibly one-sided “clawbacks” of money already paid to providers who haave already treated patients. You have no idea….

    In San Francisc, nursing power has gone beyond the bounds of nursing performance, pay and education; the state’s nursing association fights new building projects of health systems they want to influence, so they can demand guarantees of a hospital’s replacement and duration of operation, even in the face of declining demand; the number of nursing jobs it will have–for at least 15 years, and the salary increases that should be given each year. They have managed to block the approval of two projects by a major medical center for at least 5 years, raising the cost of construction about 12 % per year over that time. Still not there, even though this is a state law (seismic safety replacement). Our Board of Supervisors is blinded and pressured to let the unions have their way. I’m sure tha the public has no idea of how much this will increase their future health insurance rates.

    Fortunately, the profile of healthcare by acuity is showing strong devolution to levels below the top. This means that much of acute inpatient care is becoming an outpatient or home-based service. Doctors tend to use many fuwer union or licensed staff.

    The “professionalization of healthcare” is the upwelling of pessure to license yet additional categories of skills–supposedly to guarantee “quality.’ Massage therapists? Techs that load and unload automated bulk processing equipment? Infection control staff who take swabs that they send to the lab?

    It is particulary painful to see so many people lose their jobs, income and health insurance while the healthcare unions keep asking for more, even as they outpace the average income by 25%, with full benefits.

    I wonder what healthcare leaders would think of unions were they to end their thuggish behariors and treat their employers with gratutude for providing jobs and income? Is this a total fantasy? So what are we to think of employers who are vilified even as they carry out the full terms of a contract?

    If unions were fully honorable, they would not havae to work so hard to be heard. These right to work laws are the inevitable counter-balance to groups that have gone too far.

    Let me say it another way–it is impossible to imagine that if we had single payer that unions would prosper. Look how long it has been since Congress even passed a budget; now it is planning to take $716 billion out of Medicare without touching elibgibility or benefits. It is broke, and adding several million healthcare workers to its obligations would not make anyone feel secure.

    Here’s a vision: let unions take responsibility in a new way: 1) group their disciplines into four categories: Patient care Technician, Diagnostic Technician, Treatment technician and Therapy technician. Have the unions amalgamate accordingly. Then the workforce management firm could inventory the skills of its members, plan how to give them multiple skills, set up its own registry, contract with employers to supply them with trained, multi-skilled people, and have their members agree to be placed where most needed, either in acute, ambulatory or post-acute, and within any of their registered skills. Everyone would be better off. (I have two papers on this.)

    Policy-makers should look beyond the union demand to protect them in their presesnt format, if they really wish to reduce the costs of the healthcare system Until they deal with labor rationally, there can’t be serious cost reduction wihtout wholesale closing of capacity.

    When governors act on public unions despite the obvious political hazard, you know they do so because unions have gone too far, not because they hate unions.

    Keep this topic alive, John–it’s important.

    Hi to all–

    Wanda J. Jones
    New Century Healthcare Institute
    San Francisco

  12. Al says:

    Frank writes: “It seems inconceivable that Milton Friedman would agree with JD Tuccille’s logic as quoted above, at least in the context of the reality of today’s union laws.”

    Milton Friedman I believe hedged his statement sufficiently that I don’t know if anyone could adequately predict where he would stand on this issue today. Take note of what Hayek said: “If legislation, jurisdiction, and the tolerance of executive agencies had not created privileges for the unions, the need for special legislation concerning them would probably not have arisen in common-law countries. But, once special privileges have become part of the law of the land, they can be removed only by special legislation. Though there ought to be no need for special ‘right-to-work laws,’ it is difficult to deny that the situation created in the United States by legislation and by the decisions of the Supreme Court may make special legislation the only practicable way of restoring the principles of freedom.”

    Milton Friedman was known to bend some of his rhetoric, but in general he stated at least where healthcare was concerned that he would go against some principle if the movement in a positive direction was big enough and certain enough so that the position we would be left in would undeniably be a very positive advancement.

  13. Paul Nelson says:

    Let’s all think about this very carefully. If you needed a neurosurgeon to operate on your mother with a brain tumor, what level of skills would you want this person to have? And, what type of person would have been willing to spend 12 or more years of their life with minimal income (after High School) to have the discipline necessary to become a highly proficient neurosurgeon?

    I suggest that the current emphasis on physician payment will only make healthcare worse, as in a decrease in the availability of healthcare that is justly and equitably ACCESSIBLE as well as reliably effective. Our nation’s level of accessible healthcare has already produced a disaster for our country’s maternal mortality rate. To rank among the best ten countries of the world, we would need to reduce our nation’s maternal mortality rate by ” 7 5 % “. Think about it!

    So, if you propose to reduce physician reimbursement by 30% (viz., SGR), I hope that the final rules require a specific vote by Congress? As a Primary Physician, it does not bother me that a neurosurgeon has an income that is 3-5 X greater than mine. It takes a very special skill-set to do that job well. Anyone who has had a family member with a brain tumor would certainly agree. I hope that each Member of Congress would also agree, don’t you!

  14. John Seater says:

    I presume the apparent inconsistency in supporting unions in some industries and government monopsony in health care can be explained by vote-buying. Most doctors and nurses are altruistic people, so I bet most of them are Democrats. Nonetheless, they are small in number compared to the consumers of health care. So alienating them to buy the votes of the health care consumers is a smart calculation from a Democrat politician’s point of view. Unions are opposed by businessmen, whom I presume to be mostly Republicans, so supporting unions only irritates people already disinclined to vote for Democrats.

    With President Obama, there is another angle, which is that he is truly a socialist. His current policies most closely resemble those of the Fascists, who supported capitalists but only on the condition that the government would tell them what to do. That’s Obama’s model, at least until he can achieve outright communism (of the most sophomoric kind), which I believe to be his real ideology. Government take-over of of health care fits right in. So does support for the unions.

  15. Jordan says:

    John, was I misreading? Did you just say that most doctors and nurses are altruistic, so they’re democrats?