The Transformation Debate

Who is more American?  Is it the Kenyan or the Mormon?  Who created or destroyed more jobs?  Is it the community organizer or the private equity economizer? The candidates are focused on attacking personalities and circumstances rather than reality.

But, what really happened to blue collar jobs?  This answer is straightforward. Our blue-collar laborers became too expensive due to union agreements and healthcare costs while other countries’ laborers were less expensive and better educated.  They are more likely to have the knowledge and skills needed for hi-tech manufacturing.

It is not really just about wages, however. Germany has higher wages than the U.S.  Germany also has much higher social costs than the U.S.  Yet, their manufacturing sector is thriving — the envy of Europe.  This is due to the fact that they systematically and substantially invest in technical training for those not headed to the university.

Why would Germany make such investments?  My conclusion is that they see a healthy, educated and productive workforce as a “public good.” In other words, all Germans are better off if every German is healthy, educated and productive. This was once part of the belief system of America, but such beliefs have faded. Healthcare and education are now “private goods.”

In other words, if one wants healthcare and education, one should pay for it just like you pay for cell phones, televisions, and automobiles. No one else benefits from your being healthy and educated. If you are unhealthy and uneducated, that is your problem.  It is your problem as well if you cannot find a job and cannot afford to take care of your children.

But is that really the case?  Are unhealthy, uneducated and unemployed people of no cost to society?  Use of hospital emergency rooms for non-urgent care by uninsured people costs the average American well over $1,000 per year.  Costs of unemployment benefits add over $1,000 to the average American tax bill. Add the two items together and we are coming close to 10% of the average American’s after-tax income.

Bottom line — we are spending more per capita on compensating for uneducated, unhealthy and unemployed people than we are saving for our future.  It is very expensive — for all of us — to have large numbers of unhealthy, uneducated and unemployed people wandering around, trying to find something to eat. We need to reinvent the concept of public goods and invest prudently in health and education in ways that will yield enormous returns for all of us.

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