I'm a big science-fiction fan, so when I heard that conservative writer and FDR critic Amity Shlaes had compared contemporary politics to "The Matrix," I was anxious to see what she'd come up with.
But it was this claim that caught my eye:
Take one of the biggest problems in the U.S. economy today: jobs. Long before “subprime” or “cram down” became routine components of our language, we understood that employers need incentives to create new jobs to replace ones that are disappearing. We knew too that health-care costs are a growing deterrent to hiring or rehiring. Between 1996 and 2005 health care costs for employers rose by 34 percent relative to payrolls.
Didn’t Greg Mankiw and Doug Elmendorf suggest that this cost is fully passed onto workers in the form of lower wages? While I suggested that this may be an extreme assumption as to the lack of elasticity of the labor supply curve (see this post), Shlaes is arguing that none of these costs are passed onto workers in the form of lower wages. Maybe she should have read her own source:
Most economists believe that health insurance premium costs are ultimately passed back to employees in the form of reduced wages, so long-run compensation costs for employers are not affected by rising health care prices.