Employment flaws, healthy perspective


Employment Flaws

In his article on employment law ("Occupational Hazards," May), Walter Olson forgot to mention the most prevalent way of side-stepping employment regulations. As a Texas business owner, I can tell you many of these laws do not apply to businesses that employ fewer than 10 or 15 people. They also do not apply to hiring employees of other firms.

As a result, the trend is toward more and more outsourcing of jobs. If you use a secretarial firm to provide your secretaries, you are not as liable as if you hired them yourself. If the providing firm is small enough, it may not be liable either. If you don't like anything but pretty female secretaries, you tell the firm owner you liked Jenny better and don't send Tom again. If the owner doesn't get the point quickly enough, or doesn't want to get the point, you go to another firm.

The laws Olson describes will push us into becoming a nation of individual contractors and independent service providers instead of employees, and with that comes the undoing of all the employment laws, ridiculous or not. Then the government will have to start regulating those choices as well. Is REASON ready for the day when it must monitor the gender, race, sexual orientation, and religious preferences of its contributing writers?

Anthony M. Castaldo
San Antonio, TXst

Walter Olson replies: Chapter 16 of my book The Excuse Factory, from which my REASON article was excerpted, covers outsourcing and other ways firms understandably try to skirt the law.

Healthy Perspective

Michael Lynch's review of my book Market Driven Health Care ("Taxing Our Health," May) is a prime example of Washington myopia–like a commentary on the fourth inning of a baseball game by someone who doesn't understand the sport.

Wake up and smell the Starbucks: Entrepreneurs, newly assertive and informed consumers, and powerful, cost-effective technologies are transforming health care–not government policy. My central chapter, "New Rules: New Tools," explains the keys for success to the consumers, providers, and payers in this market. Government merits nary a word.

Washington myopia also clouds Lynch's review of my recommendations for health policy. Lynch eagerly plays a muddled version of Washington's tired class warfare game, but he does not grasp the fundamental economics of health insurance. He worries that the income-adjusted health insurance I espouse will help old–and, he presumes, rich–people like me, but will make health insurance unaffordable for young, healthy, middle-class people. Wrong. The overall impact of the risk- and income-adjusted health insurance I recommend is to substantially reduce insurance costs for the healthy middle class. (The effect of risk on insurance premiums greatly outweighs the impact of most deductibles.) And while Lynch is perfectly willing to violate libertarian principles to force the wealthy to subsidize the health insurance premiums of the middle class, he is unwilling to force anyone to subsidize the costs of health insurance for the poor. Logical Fallacy 101, anyone?

Market Driven Health Care is on the current events best-seller list because health care providers and consumers are interested in its analysis of the causes for the maelstrom in which they are caught, and in my vision of the future of the sector–the likely failure of managed care, the dubious virtues of "big is beautiful" consolidation, and the triumph of health care-focused factories. Like REASON's readers, mine are primarily interested in how a real market operates. They may create the support for a market-driven health insurance system that the muddled health policy snorers have thus far failed to spark.

Regina E. Herzlinger
Nancy R. McPherson Professor
Harvard University Graduate School
of Business Administration
Boston, MA

Michael Lynch replies: Contrary to Prof. Herzlinger's suggestion, I neither engaged in class warfare nor violated libertarian principles. As I sip my second cup of Starbucks, I recall simply pointing out that having the government mandate insurance coverage based on ability to pay–higher income, higher deductible–would have the perverse effect of forcing people with lower incomes to spend more on insurance. I also noted that giving Congress the power to specify the content of insurance policies–and the IRS the task of ensuring that each of us buys the right policy–is a bad idea.

Prof. Herzlinger's book, like her letter, is long on assertions and short on analysis of how those assertions will come to pass. Her vision is compelling, her angle is refreshing, but ultimately, like a double decaf nonfat latte, her book fails to deliver.