For more than a decade, I made my living by placing consultants with clients on a full time multi year basis. Why did they pay me a significant premium to provide their staff? There were several reasons, but the primary one was to avoid paying for health care costs, pension costs, and severance costs. For most of our customers, those costs totaled 40-50% of payroll. For us they totaled 10% of payroll.
At one point we provided more benefits. However, some of our largest customers (think the mother of all telephone companies and the father of all computer companies) actually imposed caps on how much we could charge in excess of direct salary that were set so low that it was impossible to provide any non-legally mandated benefits at all. The only factor that constrained how many staff were purchased in this manner were IRS regulations that defne employees in a way that opened the buyers to charges that our staff were actually their staff and that they could be found liable for benefit costs.
Over time, the the maximum extent legal, I expect almost every company that competes on a global basis to eliminate benefits for their non-managerial employees. Discrimination laws (by job class, not race or religion) now prevent companies from having one set of benefits for highly compensated staff with another for everyone else. However, lobbyists continue to look for loopholes and continue to have success in creating new ones. In the meantime. moving jobs overseas is the ultimate loophole since it avoids both the discrimination charge and the threat of IRS audits.
The impact of this trend will be the collapse of employer paid health care benefits in most major industries. To save jobs, to make our businesses more competitive in the global economy, and to preserve health benefits for at least the lower 50-60% of our population, I see no alternative to publicly financed health insurance paid through general taxes, not payroll taxes.