(Bloomberg Opinion) -- Someone on Twitter recently asked me an interesting question. If I were to pick three policies to improve material living standards for the vast majority of Americans, what would I choose?
Right now there are a lot of big ideas clamoring for the country’s attention and political capital: universal basic income, a federal $15 minimum wage, a job guarantee, child care benefits and free college, to name a few. But while all of these proposals deserve consideration -- and some deserve to be put into practice --the three areas I’d pick to concentrate on would be national health insurance, sectoral wage bargaining and cheaper housing.
Let's start with health care. It's one of the things people in any advanced nation just can’t do without. Injuries and diseases threaten not only people’s lives, but their ability to work and earn a living. Yet the U.S. system is uniquely dysfunctional. Uncertain coverage and surprise medical bills followed by months of negotiations with providers make paying for health care a nightmare. But the real killer is cost -- the U.S. spends far more of its Gross Domestic Product to get about the same quality of care as other countries.
Even countries that are richer than the U.S., like Switzerland, Norway and Singapore, spend less on health care. The system is riddled with inefficiencies, and providers’ monopoly power is a problem as well. Those excess costs end up coming out of regular Americans’ paychecks one way or another, whether in terms of higher premiums, deductibles, unexpected bills, coverage denial, lower wages from employer contributions or payroll taxes.
A national health insurance system would be able to control those ruinous costs. By using its market power to bargain prices down, the government health insurer would be able to squeeze excess profits out of the system and force providers to increase efficiency. In fact, Medicare already gets much lower prices than private insurers:
The easiest way to implement national health insurance would be to cover all Americans through Medicare. Medicare is an existing, proven system with proven results. And it includes modest cost-sharing that would preserve a role for private insurance and limit overspending, much as the Japanese and South Korean health systems do.
The second essential thing Americans are having trouble getting is housing. Rents have risen faster than incomes since the housing crash:
The rent crisis has been especially acute in big coastal cities where higher-paying jobs are located. This gives many Americans a choice of cheap housing or good career prospects. Houses have also become harder to buy, as mortgage lending standards have tightened, leading to a fall in the homeownership rate back to 1990s levels; the pandemic has only made things worse. Meanwhile, local political dynamics have led to exclusionary policies that have the effect of keeping lower-income Americans out of desirable locations. The pandemic has brought rents down somewhat in superstar cities, but so far there’s little sign that the fundamental forces driving people to live there have evaporated.
Deregulating housing -- for example, banning single-family zoning, eliminating parking requirements where reasonable, and loosening building-height restrictions -- will help. But an even better solution would be to have the government build housing itself and sell this new housing cheaply to young and low-income first-time homebuyers. This system, similar to what Singapore does, could provide plentiful housing in high-opportunity areas while allowing young people to build home equity and wealth the way the Greatest Generation did with the G.I. Bill after World War 2.
Finally, Americans have been facing wage stagnation. Even after adding in health insurance premiums and other benefits, compensation has grown more slowly than in previous decades, even as GDP has steadily risen:
Higher minimum wages would help those at the bottom, but the most effective remedy for the overall economy would be a return of union power. Unfortunately, labor unions in the U.S. are forced to organize establishment by establishment, putting any unionized shop at a competitive disadvantage.
The solution -- the third big policy I would choose -- is known as sectoral bargaining. It allows all the workers in a particular industry within a particular area to get the same wages as the unions that negotiate with groups of local employers. Countries that use this system tend to have higher union representation and less wage inequality. Sectoral bargaining would allow Americans in a huge array of occupations to feel like they had a bigger stake in the economic system, and thus might even improve productivity as an added benefit.
So these would be my three top policy choices for material betterment: national health insurance, plentiful housing and sectoral bargaining. The first two address the basic necessities that Americans aren’t getting enough of, while the third would put more money in the pockets of average workers. These aren’t the only things Americans need, but affordable and reliable health care and housing, coupled with higher wages, would go a long way toward alleviating material hardship in this country.
This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.
Noah Smith is a Bloomberg Opinion columnist. He was an assistant professor of finance at Stony Brook University, and he blogs at Noahpinion.
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