“The existing social safety net policies and programs . . . are not well designed to reduce insecurity, increase risk-taking and help the nation prosper in the global innovation economy,” says a National Governors Association working paper.
Our setups for health insurance, unemployment insurance and pensions were all designed for a time when male heads of households worked their whole careers for one or two large and stable companies, layoffs were short and temporary, and retirement stretched from 65 to 75.
That’s all changed. Women account for a much bigger share of the workforce. People typically have a dozen or more employers during their careers, at companies of all sizes, with chances that the company they work for will be bought up or closed down by the time they retire. Layoffs are common and permanent. And retirement starts anywhere from 55 to 75 and stretches into a person’s 80s and 90s.
As a result, defined-benefit pension systems are history, unemployment insurance covers only about a quarter of those without a job, and health insurance costs are rising so fast that growing numbers of private-sector employees are going without. Oh, and did I mention that Medicare, Social Security and public-sector pension programs are gobbling up government budgets?
There are thousands of proposals on how to fix all this. It seems clear that the first step is to move from employer-based systems to ones in which people and the government take a broader role.
In health care, for example, one can imagine a system in which all workers and nonworkers are required to buy insurance from the government-regulated exchanges being set up in each region or state under the Obama health-care reform plan. In lieu of the tax exemption for employer-paid health insurance that benefits the rich and encourages lavish coverage, everyone would get a voucher to help pay for policies offered at the exchange, which could range from low-premium, high-deductible policies to cover “catastrophic” illness to high-premium policies that cover virtually everything.
Vouchers would vary according to household size and income, allowing for an additional subsidy for low-income families. Employers could provide additional taxable vouchers to employees, but otherwise their role would mainly be as premium collectors. In time, Medicare and Medicaid could offer their own vouchers, using exchanges and managed-competition to replace current programs.