Healthcare in a Global Economy
As a small business owner, healthcare costs are killing me. I therefore try to pay attention to the current debate taking place in Congress over national healthcare. Sadly, I think the debate fails to address what is really needed and why it is needed. I am just beginning to comprehend what is happening globally. Sure, all of us read about outsourcing. But, it is beginning to dawn on me exactly what this means and how big this transformation really is. There is no stopping globalization because it makes incredible economic sense. I am schizophrenic about globalization. I think it is wonderful that India, China, Vietnam, and many many countries are lifting millions and millions of people out of poverty. I think it is wonderful that we can by clothing and equipment at considerably cheaper prices due to the savings in labor. But, it comes with a tremendous cost companies in America and to skilled labor in the developed world.
A year ago, I watched John McCain give a speech to auto workers in Michigan. Remember how he gave ‘town hall’ type presentations? Someone asked him how he was going to save their jobs. And, in a rare moment of political honesty he sadly responded, “The jobs are not coming back.” He went on to say how the government needed to fund training for new jobs. I was shocked! And, I did not completely understand what he was saying. But, the question and answer stayed with me. There is a worldwide surplus of auto manufacturing capabilities. That is the primary reason for the crisis in Detroit. Sure, we can blame unions if we are on the political right. Or, we can blame gas guzzling behemoths if we are on the political left. But, both complaints miss the larger point. The point is that you can build a very good car in Korea cheaper than in the U.S. And, you can build it cheaper still in China or India. I hate saying this, but the truth is the income levels of our autoworkers must come down due to international competition. McCain was right, those jobs are not coming back. We used to build 13,000,000 cars a year here. Now we build 10,000,000. Obama’s auto efforts, right or wrong, are an attempt to save maybe 8,000,000 U.S. built cars. And, even then, it cannot happen under the old wage system. Again, I hate this reality. But, it is reality nonetheless. International competition is driving down costs.
My business is a piece of pollen floating in the wind. I have a small manufacturing company with 12 employees. I am a working stiff who puts in 70 hour weeks for an average salary most years. I cannot outsource my business because I would have to carry huge finished product inventory and I do not have the funds to do so. I am a tiny version of Detroit. The big guys in my industry have all gone to China. I compete against companies that are paying $ .30 an hour in wages. If I am going to survive, I damned well better have some competitive advantages that China cannot provide. I will not elaborate, but I do have advantages. Still, I need to reduce my prices. Now, I have a group of employees that I will pit against any work force anywhere. They are hard working and take great pride in producing good product. But, they earn between $ 10.00 and $ 15.00 an hour. If I raise that labor rate, I am out of business. The company will close and those people will be looking for new jobs. And, those new jobs will likely not pay even what I pay. We all have to better understand what is happening globally, to better understand what is happening in America. The world is transforming. And, the result is that there is going to be tremendous dislocation for the working class in this country. And, that dislocation is permanent. It has nothing to do with Wall Street. It has nothing to do with unions. It is entirely related to globalization which is unavoidable.
I want to give two personal illustrations about globalization and then return to healthcare. About 1 1/2 years ago I built my own website. As many of you know, a website is nothing without traffic. How do you get people to find your site? We all use Google or some other search engine when we are trying to find something. How do you get your company listed on the first page of Google? The process of developing good ‘page rankings’ is called Search Engine Optimization – SEO. I called perhaps 7 or 8 U.S. based companies that specialize in this. I could not afford them. I also bought 2 books on it. One of the books mentioned an internet company, ODesk, that deals with an entire range of computer issues. If you do anything with websites, you have to check out this company. Basically, you write up a job description you want done and place it on ODesk. Qualified specialists from all over the world, bid on the job. I have hired people from India 3 times, one from Britain, one from Russia, and one from the U.S. We instant message and they do the job in a couple days. I have saved thousands of dollars by going to India to have my work done. That is what we are facing – globalization. I am now seriously looking at hiring an accounting company from India to do my books and taxes. It will halve my accounting costs.
This is the world we live in and nothing is going to change it. And, because I am not the brightest guy, I did not understand, until recently that I too am a player in globalization. So, my point thus far is to illustrate what is happening to millions of jobs in the U.S. John McCain, in a rare moment of political honesty, spoke the truth. “Those jobs are not coming back.” On a micro level millions of people and thousands of companies will disappear. On a macro level we drive down costs and raise living standards world wide. But, those job losses throw people on the street. And, since manufacturing jobs are easily exportable, a guy who used to earn $ 25 an hour as a welder in some company is now looking for work in a country with a huge surplus of welders. If he finds a welding job it will be for $ 20 if he’s lucky. That’s a $ 10,000 a year hit in income! And, most won’t find a welding job at all. They have to be retrained. “Their job isn’t coming back.” What we are witnessing is not a recession. It is incredibly bigger. We are watching a worldwide transformation of business. And there is simply no stopping that train.
So, now I will return to healthcare. Tell me how a family can afford healthcare – currently $ 12,000 a year for a family of 4 – if he’s earning $ 40,000 a year? The average family earns around that figure. And, those costs keep escalating. That is why I keep saying unless we control costs, we are doomed. No plan works. Not single payer, not co-op, not private insurance. NO PLAN WORKS! I would love for Congress to fix healthcare. But, they are tilting at windmills. Don’t get me wrong. I want healthcare fixed. But socializing healthcare does not fix it. Privatized healthcare does not fix it either. Reducing healthcare costs is the only solution. National healthcare without cost reduction is like putting the roof on a house before the walls are up.
Ultimately, we have to do two things. We have to lower costs. And, part of that cost reduction has to be with rationed healthcare. It is this second point that no politician will voice. Not true! Republicans voice it as a scare tactic. And, it truly is scary. But, it is no less real. Today we ration healthcare. We exclude poor people 40 million and growing. Is that the correct approach to healthcare? You decide. But, remember healthcare costs are going to increase. And, “Those jobs are not coming back.” The number of uninsured is likely to double without some type of reform.
I am lucky. My kid was born with a reasonable degree of intelligence. And, although he played around in Europe for a year, he eventually came home and finished college. He has a good job that cannot be outsourced. His future will be just fine. But, millions of normal people, good people, will lack job opportunities that will pay the wages of a welder. Remember too, I am going to outsource my accounting! I am talking about job losses on whole ranges of abilities. I have no solution to healthcare. But, so far no one else does either. And, all the discussion and debate in Congress on healthcare reform does NOTHING to truly address the issue.
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