In my post about a CNN video about the rise of socialism among the youth, Mr. Divemedic left a comment that I have been ruminating on for a day.
Case in point: Several decades ago, I worked the overnight shift for the Walt Disney company, back when Michael Eisner was the CEO. We had a meeting with a company executive one night and we were told that Disney’s goal was to have no permanent, full time employees within ten years. They wanted to replace all of their full time employees with contracted employees through subcontractors. They said that health care costs for employees was costing the company $90 million a year.
One of my coworkers then pointed out a news article where the CEO (Eisner) had received $270 million in pay, company stock, and other benefits the previous year. He then asked if they could pay the CEO only $180 million and let all of the other employees keep their jobs. The meeting was abruptly ended at that point.
In economics, there is something called externalities.
According to Investopedia:
An externality is an economic term referring to a cost or benefit incurred or received by a third party. However, the third party has no control over the creation of that cost or benefit.
So let us say that Eisner got what he wanted and Disney was able to fire all but a few managers and replace all workers with part-time sub-contractors and gig workers.
Disney is vital to the economy of central Florida in the Orlando and Kissimmee region.
So what happens then?
There are over 77,000 full-time Disney employees in Florida.
Disney employees lose the bulk of their salaries. Others get fired completely. They all lose their health care.
Some would go underwater on their mortgages. Others will move out leaving vacancies. New people would be less likely to relocate to the region for gig work. This would harm the housing marking in central Florida.
Out of work employees would go on unemployment. Some would go on welfare and Medicaid. Others would go without healthcare and end up being uninsured at the ER, which is reimbursed through tax dollars.
The deprecation of the housing market would reduce property tax revenue in the region, leaving local budget shortfalls.
Tourists spend money but they don’t buy homes.
Disney would save $90 Million on healthcare costs. Millions more on salary.
Eisner (or the current CEO) would pocket hundreds of millions in bonus money from the “cost savings.”
But where did those cost savings come from? By dumping those costs onto the American and Florida taxpayer that has to foot the bill for out of work employees, the loss of healthcare, and hit to the local housing market.
Disney would have profited by making employee costs a negative externality.
This is reprehensible.
If Disney dumped a bunch of old rides and rotting food into Lake Okeechobee and polluted the water, rather than pay for proper waste disposal, people would rightly be angry about that sort of negative externality.
However, dumping workers onto unemployment, welfare, and Medicare instead of making payroll somehow gets a pass.
It should not.
If you are a conservative that is worried about entitlement spending, letting companies cost cut for profit by dumping people onto entitlements should enrage you.
It’s not socialism to say “the CEO can’t bonus himself with layoffs” when the taxpayer picks up the tab for those layoffs.