Take Away the Entire Welfare State From Employers

In the wake of the Hobby Lobby decision, numerous writers have noted that we shouldn't have employer-provided health care at all (I, II). Instead, they argue, it should be done publicly. These arguments don't go far enough though. We shouldn't move just health care away from employers; rather, we should take away the entire employer-provided welfare state.

The phrase "employer-provided welfare state" might seem to be a contradiction, but it's an apt description of what we have in this country. Employers don't just pay out cash incomes to workers, but are instead tasked -- whether by law or not -- with running complex social insurance schemes among their workforce. They pay people to take time off of work for leisure (vacation), take time off of work to have children (parental leave), put away money for their retirement (pensions, 401ks), provide short-term disability leave, provide health care, protect them against unemployment (severance), and so on.

To fund these internal social insurance schemes, employers impose what amount to labor taxes on their workforce. They reduce the cash compensation they would otherwise pay their workers in order to retain a pool of money that can finance all of these various welfare benefits.

We spend a lot of money on these kinds of social welfare expenditures. While we have one of the lowest levels of public social expenditures among developed countries, we have one of the highest overall (public plus private) level of social expenditures:

So we already have what amounts to a pretty enormous labor-tax-funded social welfare state. It is just really inefficient and broadly terrible. When you lose your job, you lose many of your welfare benefits. What welfare benefits you can get depends on what company you happen to be employed by. Small employers don't have a big enough pool of workers (or the competence often) to offer the welfare benefits at all. Finally, low-income workers tend to get denied access to the benefits altogether.

The sensible move here would be to liberate the entire welfare state from private employers as much as possible. It makes no sense to have a patchwork of millions of different corporate-administered welfare states throughout the country. If you think it is good to have labor-tax-funded welfare benefits, then we should go for it. Impose higher labor taxes (to replace the implicit labor taxes employers already impose) or maybe tax something else like consumption. Then, with that revenue, provide universal paid vacation, universal parental leave, universal healthcare, universal severance, universal pensions, and so on. Instead of having each little corporate unit running its own tiny social insurance pool funded with its own internal labor taxes, use the entire country as a social insurance pool that is funded with labor (or some other) taxes.

Under the current corporatist welfare state model, we are already spending what a lot of countries spend on total welfare benefits. But, because that model is so terrible, we don't get nearly as much out of it, and, as a bonus, we wind up burdening companies with complicated and expensive welfare benefit administration that is a total distraction from their primary economic purpose.