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Let workers decide how to spend their money

The basic idea here seems to be that employees should be allowed to choose how to spend their own money. It's a great idea! Many employee groups have won "opt out" provisions, allowing employees to receive cash in lieu of benefits (read some labor contracts, "alf"). Whether the employer spends the money on wages or on benefits, it comes from the same pot.

It makes sense to let employees choose their own health insurer and level of coverage. For example, I get comprehensive insurance from Kaiser Permanente for $150 per month. This is an individual plan. An employer would pay about $300 per person per month for a typical group plan from Kaiser. My copayments are higher, but my premium is much lower, and that works for me. I'll keep the $150 savings, thank you. If an employee is unable to find, or qualify for, suitable individual insurance, the person can always "opt in" to the employer's group plan.

Here's another example. Historically, state and local employees were not covered by the retirement portion of the Social Security program. In the 1970s, the federal government allowed state and local employers to join if they wished. The University of California opted not to cover "casual" employees, including students and people with short-term jobs. Instead of paying Social Security premiums, those employees contribute a like amount to a defined contribution plan [called a 403(b) plan, and similar to a 401(k) or Keogh plan, or a traditional IRA]. They can choose how the money will be invested (savings, bonds, mutual funds, etc.); borrow against the money in an emergency; and, once they leave UC, even cash out if desired. The contributions are made on a pre-tax basis (cf. Social Security premiums, which are essentially after-tax) and the gains accumulate tax-free. Tax is due only when the money is finally withdrawn -- usually at retirement. Most importantly, the money belongs to the employees. At retirement, a "casual" employee with a few years' worth of Social Security credits would be eligible for a Social Security pension of exactly $0, despite having paid thousands of dollars in premiums.

As you can see, employees benefit when we let them decide how to spend their own money.
 


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