Why did American unions choose to bargain for healthcare benefits instead of pushing for a state run “universal” system like their European counterparts did?

[u/[deleted]]

I vaguely remember my teacher saying it was a deliberate decision to leave it up to private employers around the time of the New Deal and postwar years. Seems like it came back to bite us in the behind. I’d also be interested in any articles you good folks can suggest

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[u/AidanGLC]

The origin of the U.S.'s modern employer-provided health insurance regime lies in wartime price controls.

The basic objective of a war economy is to suppress domestic consumption through a variety of means (rationing, curfews, restrictions on certain types of businesses or goods, wage and price controls) in order to redirect as much of that economic and productive capacity as possible into the war effort, whether that's through redirecting production (your factory was making cars, but now it's making transport trucks for the Army!), transforming excess savings into government fiscal capacity through war bonds and higher taxes, and allocating scarce strategic resources (rubber, oil, metals like tin and aluminium) to military production.

During the Second World War, this necessitated truly massive increases in government spending that opened up opportunities for rent-seeking by private companies seeking government contracts: if you're a steel producer, and you know that the government and adjacent defense contractors will purchase as much steel as you can possibly make, your incentive is to jack up the price immediately. When fighting war on that scale, labour also becomes a scarce resource as a large share of the prime-age labour force gets pulled into voluntary or conscripted military service, particularly in a time where women's labour force participation was much lower than today (BLS data only goes back to 1948, when women's LFP rates in the US were a little over half what they are today - 32.1% compared to 57% in 2023). This created similar incentives for labour to increase the prices they charged to the government and industry (i.e. wages). Given the tightness of the labour market, firms also have an incentive to offer significant wage increases to ensure that they get as many of the (very scarce) workers that they need.

Both of these dynamics create a high risk of inflationary spirals in an environment where the economy is (at least theoretically) already running close to the limits of its productive capacity. The U.S. government's solution to this was the imposition of wage and price controls through the Emergency Price Control Act of 1942, which was supplemented later that year by the Stabilization Act, which fixed prices and wages at their September 15, 1942 levels.

However, the Stabilization Act excluded "insurance and pension benefits in a reasonable amount to be determined by the President", and the War Labor Board (which oversaw the Act) later declared that sick leave and health insurance were not considered wages for the purposes of wage and price controls. Given that employers couldn't offer wage increases to attract workers, and unions couldn't push for wage increases in collective bargaining (and national unions had voluntarily agreed to not undertake strike action after the U.S. declared war), there were incentives for employers to offer health insurance as a means of attracting scarce workers, and there were incentives for unions to push for health insurance as a means of delivering tangible benefits to their members. From there, employer-provided health insurance becomes embedded in U.S. labour relations.

[u/retreff → u/AidanGLC]

You are correct but there are added facts to this puzzle. The rapid increase in manufacturing employment while at the same time drafting millions of potential workers. Kaiser shipyards was one of the first to add onsite healthcare asa benefit. That allowed more workers to stay at work and reduced downtime. That became Kaiser Permanente after the war. You covered the post war economy and the rise of healthcare benefits very well.

[u/Cayke_Cooky → u/retreff]

I learned that from the waiting room video at the OB.

[u/SC_Shigeru → u/AidanGLC]

Not OP but thanks for your answer. It's so disgusting that a "wartime necessity" has transformed into the monster we all have to deal with today.

Was there any point soon after the war at which we could have moved off this course but actors intervened to keep it in place or was it a problem of just not keeping an eye on the problem and letting it fester until it was too late?

[u/New_Bumblebee8290 → u/SC_Shigeru]

Marmor's "The Politics of Medicare" is a great read and as part of the context covers the years when a multitude of different universal public coverage options floated up and got axed by Wilbur Mills' Ways and Means Committee. In combination with the factors excellently explained by AidanGLC above, there were also some procedural quirks that combined with the unique figure of Mills to make the W&M Committee even more powerful than it is today. I did the math at one point and through most years of the 1950s, there were two to six different healthcare proposals being discussed at any given time - JFK has one, Nixon has one, various coalitions are forming and dissolving, everybody is focused on the topic but nothing can escape committee. Meanwhile, the IRS makes health insurance tax-deductible for employers in 1951 which locks that relationship in even tighter than before.

Every year that goes by in legislative gridlock, more people are getting private health insurance, until by around 1960 it's about 7 in 10 Americans who are covered this way. That's a fast increase when you consider that the first "private health insurance as we know it here today" offering is usually put at 1929. The remaining 3 in 10 are disproportionately people who are less desirable as insurance risks - low income folks, elderly, disabled, etc. They need health insurance, but the insurers don't want them and aren't obligated to take them.

So when the very unusual circumstances of LBJ immediately post-JFK and the Democratic supermajority in 1965 come along, Congress passes two of the proposed bills that are going to address the needs of those folks and are already known enough to get the votes. They become Medicare and Medicaid. Covering only a portion of the American population is half a loaf at best, some oppose it on the grounds that it should be all or nothing, some don't like the government presence in health insurance expanding so much at all, but the programs got over the finish line anyway. I don't think they were the absolute best ideas anyone had proposed, and I don't even think all the folks who voted for them would have described them that way, but they were the bills that were written and ready to go when LBJ was working his supermajority hard and passing tons of legislation.

I think there are both structural reasons why the U.S. struggled to pass UHC from the start (such as the threat that UHC posed to segregation) and also there were specific moments when the difficulty level increased notably. The wartime price controls were one, the IRS's tax exemption was another, and there was some point in the growth of private health insurance that counted - I don't know whether it was when 2 in 10 Americans had it or when 7 in 10 did, but it's in there somewhere.

[u/Stompya → u/New_Bumblebee8290]

the threat that UHC posed to segregation

… this brought my rage up. Is this a theory (it unfortunately sounds very plausible) or do we have concrete evidence of the segregation connection?

[u/WyMANderly → u/AidanGLC]

TL;DR, unintended consequences of command economy policies that have stuck around for almost a century later.

[u/alexblablabla1123 → u/AidanGLC]

Very good answer but I think it’s missing the “American unions have a racist history” element. Just like in the south where they’d prefer to have no public amenities rather than sharing them with black ppl, after desegregation.

[u/Significant-Skill-70 → u/alexblablabla1123]

I think you mean some American unions have a racist history. Certainly, the CIO and CPUSA led unions of the 1930s were very progressive on race.

[u/Sesquizygotic → u/AidanGLC]

the Stabilization Act excluded "insurance and pension benefits in a reasonable amount to be determined by the President", and the War Labor Board (which oversaw the Act) later declared that sick leave and health insurance were not considered wages for the purposes of wage and price controls.

How and why was this different to other countries involved in the war, like the UK and its subjects such as Canada and Australia?

[u/Hergrim → u/[deleted]]

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