Collective vs. Individual Benefits
By Arnold Kling
I have a new essay that argues that we over-estimate the value of collective benefits.
Contrary to my training as an economist, I believe that at least some of the preference that workers have for in-kind benefits reflects flat-out irrationality. Even without tax arbitrage (and, after all, something like half the population pays no income tax and therefore does not even participate in tax arbitrage), many workers would choose to receive $4000 in health insurance rather than take $5000 in salary, even though the latter would allow them to buy health insurance and have $1000 left over.
I go on to argue that people over-estimate the value of government-provided benefits in education, health care, and pensions.
For Discussion. In a market undistorted by tax effects, are there any rational reasons to prefer corporate benefits to straight salary?