…labor compensation comes in two parts: cash wages and fringe benefits the most important of which is health insurance. Most minimum wage laws set a floor on cash wages and leave benefits to be determined in the market. Not surprisingly, studies show that among workers who retain their jobs, employers reduce benefits dollar-for-dollar with the increase in the cash wage. Independent of the effects on the worker, this result is socially bad.No one knows how many minimum wage workers or more precisely, how many workers within $2.10 of the previous minimum have health insurance acquired through their employers. At least I don’t think anyone knows. But we must be talking about hundreds of thousands. Health insurance for every one of them is at risk.Why would politicians want to tell people that if they can’t produce $7.25 an hour they can’t work? Why would politicians want to tell people that if they can produce only $7.25 an hour they have to take all their compensation in cash and none in health insurance?I don’t know the answer to these questions. But on the assumption that Congress was not just throwing a mean-spirited sop to the labor unions and really wants to help low-wage workers, I have three proposals everyone should like – liberals and conservatives, Democrats and Republicans, altruists and curmudgeons – one and all:
1. Allow employers to count health insurance expenses against the minimum wage increase so up to $4,200 of the mandated increase for a full-time worker could go to health insurance.
2. Allow employers who do not provide health insurance to use the increase to purchase non-taxed, individually owned insurance instead of paying taxable wages.
3. Allow employees to choose between taxable wages and non-taxed, individually owned health insurance.