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July 27, 2005

Race you to the bottom!

The Massachusetts Taxpayers Association reports that health care costs are eating up municipal budgets like beetles through bark. Apparently, it's partly because contracts are negotiated somewhat differently for those unions than those with state employees. Still, it's not good news that cities and towns are in the same position as, say, GM, in paying ever-exploding health care costs.

On one hand, there's a place for groups like the Group Insurance Commission, which as the Globe suggests, acts as an honest broker for reasonable benefits for state employees. It's good that there's something like that for those state workers -- and us taxpayers.

But for companies like GM who are facing similar problems, I don't necessarily share some folks' optimism that they have to choose between 1. skyrocketing health costs, or 2. higher taxes and an increased government role in health coverage. There's a third choice: neither. If business interests completely reject the idea that they have any responsibility for health care at all, either in the form of benefits or tax support, that's bad news for all of us. Sure, we all want low low prices, but we may only get that at the expense of our own health.

Luckily, the labor marketplace doesn't seem to necessarily want to race to the bottom quite so fast: Toyota just opened a plant in Canada, famously choosing it over the states because of our rising health care costs.

Massachusetts seems to be having competitiveness problems of its own: New England just recently dropped to a spot to number three on the list of areas getting the most venture capital. Now, there are reasons to think this was just a blip. But it's foolish to think that job growth and economic expansion are just a matter of having Wal-Mart wages and benefits: we need to think about what kind of jobs we want, and have the government take an active role in attracting them.

For instance, decent public education, investing in a smart and capable workforce: Toyota cited the, er, difficulties in training workers in Alabama as a reason to move to Canada. We do reasonably well at that in Massachusetts compared to the rest of the country. Creating -- and just as importantly, allowing the creation of -- more affordable housing is one thing government could do. What if we were able to bring down the cost of health care in MA, through re-insurance, increased pooling, or using the buying power of the government to bring down the cost of pharmaceuticals?

As Paul Krugman pointed out recently, providing decent, affordable health care could be our competitive advantage, if we decide to take up the challenge.

Posted by Charley on the MTA at 03:14 PM in Massachusetts, National | Permalink


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Just wondering - when you talk about affordable housing, do you mean market-rate housing or subsidized housing?

Posted by: Ken | Jul 27, 2005 6:10:20 PM

A couple of thoughts.

1. The reason that the impact of rising health care costs is different for municipalities than for the Commonwealth is that in the cities and towns the employee contribution to health care costs is subject to collective bargaining. At the state level, it is not.

2. Toyota is opening a plant in Canada in part because of competitive advantages in both health care costs and employee training (the Canadian workforce is better educated). However, Toyota has been opening plants all over North America. They opened a plant in San Antonio, Texas recently. The San Antonio case illustrates some of the hurdles manufacturers face in siting facilities in the US. It took the City of San Antonio buying the land - four square miles worth - and making site improvements to entice Toyota to South Texas.

Posted by: David Eisenthal | Jul 27, 2005 7:55:15 PM

Ken: both, insofar as they affect the business climate.

David E.: Thanks for the clarification on 1. Generally I think of collective bargaining as a good thing. It's a tough decision that cities are left with.

On 2: There are all kinds of ways to make a business-friendly environment. Some are compatible with the well-being of people, such as I suggested. Some, like "right-to-work" laws and an absence of environmental protections, are not. So I guess I'm asking: What are the good things?

Posted by: Charley on the MTA | Jul 27, 2005 9:17:31 PM

Consider how much a 4 square mile plot of developable land -- 2,500 square acres -- would sell for in the Northeast. Companies are choosing the South because there is a ton of land there, they can build sprawling single-story buildings on hundreds of acres of land. It's cheaper for them in both acquisition and operating costs. The South is essentially trading in its farmland on the cheap for factories. It's sprawl at its finest.

We can't do that here. We don't have thousands and thousands of acres of flat land that we want to develop into industry.

Posted by: Ralph Slate | Jul 28, 2005 11:38:31 AM


As you pointed out, our competitive advantages include our "smart and capable workforce." I would also point to a mature and fully developed transportation infrastructure.

I think our competitive advantages aren't likely to lend themselves to lots more heavy manufacturing - like vehicle assembly plants - moving in here, but rather more of what we've had for the past 40 years - "high tech" and biotech.

Posted by: David Eisenthal | Jul 28, 2005 12:19:50 PM

David E: Exactly. So, have we been leveraging our advantages to the fullest? Or have we been trying for something we're not cut out for, under Romney/Finneran et al? Has Mitt been a success in bringing new business to MA?

I realize I'm being terribly vague, but it seems to me that the things that have been cut in the last few years (education & local aid), and the things that are in danger (health care) may be challenges that a new progressive political culture is well-equipped to attack. And since "This was the week it became valid to write: 'Romney, who's not expected to run for re-election'", it may well be up to us to think about what to do next.

Posted by: Charley on the MTA | Jul 28, 2005 3:51:24 PM

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