Medicare Cut Seen Raising
Labour Costs
Bargaining issue of the decade predicted if private sector forced to pick up costs
By VIRGINIA GALT
Globe and Mail
February 12, 2002
Labour costs could shoot up, jeopardizing one of Canada's key competitive advantages, if universal health care is eroded and unions go after employers for private coverage, industrial relations specialists say.
"It will become the bargaining issue of the decade" if the private sector is forced to pick up a greater share of health care costs, Brian Payne, national president of the Communications, Energy and Paperworkers union, told representatives of several top corporations at a closed meeting in Vancouver last week.
The Conference Board of Canada, which organized the meeting to discuss emerging labour relations issues, confirmed that publicly sponsored health care "has been a real source of competitive advantage, particularly over the United States."
Canadian businesses are vitally concerned about the outcome of the current political debate on health care restructuring because "we're experiencing competitive pressure like never before to better manage our business costs," Conference Board economist Prem Benimadhu said in an interview from Ottawa.
Funding for Canada's health system comes from a mix of public and private sources, but the majority of its funding comes from taxation. Any move to shift more costs to the private sector would have significant implications for employees and employers, Mr. Benimadhu said.
In the United States, where the majority of health care benefits are provided through private insurance plans, employers are facing average increases of more than 12 per cent in their health care premiums this year, Mr. Payne said, "and that's on top of 11-per-cent increases last year."
Detroit-based General Motors Corp. alone provided health care for 1.25 million U.S. employees, retirees and their dependents in 2000, "or 0.5 per cent of the total U.S. population," New York investment firm Morgan Stanley Dean Witter & Co. wrote in a recent research report. "This equates to roughly $3.9-billion [U.S.] in health care benefits . . . or $3,000 per member."
Put another way, it amounts to $931.70 for every GM vehicle produced in the United States that year.
"We don't need this," Mr. Payne said in an interview from Vancouver, but if unions are put in a position where they have to fight their Canadian employers for additional medical benefits, they will.
Last week, former Saskatchewan premier Roy Romanow issued an interim report on his royal commission of inquiry into the Canadian health care system, saying medicare needs remodelling, but "does not need demolishing." There were no clues in his initial report as to whether he will recommend that governments try to contain health care expenditures by shifting more of the costs to the private sector. Some provincial governments have already stopped funding some procedures that they deem non-essential, and Alberta Premier Ralph Klein has proposed that Albertans pay a certain portion of their health care costs out of pocket if they exceed a certain legislated amount.
Meantime, Ontario's Ministry of Economic Development and Trade has found that "many companies cite universal health care . . . when they conduct a search for an attractive place to invest," spokesman Eric Shapiro said in an interview.
Canada's relatively low wage and benefit costs give it a significant competitive edge, Mr. Shapiro said, noting that a recent study found that Canada is the least costly place to do business out of nine industrialized countries surveyed by New York-based KPMG LLP.
After comparing wage and benefit costs, taxes, transportation, and utility costs in North America, Europe and Japan, KPMG reported that Canada has a 14.5-per-cent cost advantage over the United States.
The single most important cost factor examined in the survey was labour, KPMG said. While the lower value of the dollar contributed in large part to Canada's wage advantage, the universal health care system "is a significant factor" in keeping private benefit costs down, said study co-author Stewart MacKay, who works out of KPMG's Vancouver office.
Canada pays less in statutory and non-statutory benefits, as a percentage of payroll, than the United States, Britain, Japan, the Netherlands, Austria, Italy, France and Germany, KPMG reports.
The Conference Board of Canada, in a recent briefing paper on corporate health care costs in Canada and the United States, said "health care has been called the symbolic nation-building railway of the 21st century.
"Any policy debate on the future of the health care system of Canada should recognize not only medicare's symbolic value to individual Canadians, but also its economic contribution to the competitiveness of Canadian businesses vis-à-vis the United States," the Conference Board report said.