Some conservatives like to cite the adage that no one’s life or property is safe while the Legislature is in session. I usually dismiss that sentiment as anti-government cant. But then the Minnesota Legislature comes along and makes a fool out of me.
The latest economic idiocy to issue forth from this august body is a law that limits the fees temporary-employee agencies can charge nursing homes.
Sponsors of the legislation say it is necessary because the fees charged are too high for the nursing homes to remain solvent and that agencies attract permanent workers away from nursing homes. The result may be that already short-staffed nursing homes will have even fewer workers, and elderly residents will get even poorer care.
One part of the problem is the ongoing tightness in Minnesota labor markets. Demand for labor in many areas has lured people not only from fast food joints, but also from nursing and teaching.
The Legislature, however, has never had much respect for market forces. This is the body that refuses to allow insurance companies to sell policies with provisions requiring the insured to seek lower-cost repairs. As a result, we all pay higher insurance premiums than we might other wise.
And this is the body that imposed a 2 percent tax on health care bills in the early 1990s to fund a program for low-income households without health insurance. Then lawmakers were upset when doctors passed the fee along to patients.
In other words, the Legislature frequently is challenged by basic economic truisms such as the fact that government can put a legal ceiling the price of something, but it cannot force providers to continue to produce the same quantity of the good or service.
Historian Barbara Tuchman documented similar measures in A Distant Mirror. During what she termed “the calamitous 14th century,” the Black Death, other disease and warfare significantly reduced the populations of western European countries.
With smaller labor forces, wage rates rose. Monarchs, local lords and church officials issued decrees prohibiting higher wages. But the missing cohorts of workers could not be replaced with the stroke of a quill pen. Wages inexorably did rise, regardless of any punitive measures imposed to enforce decreed wage ceilings.
During World War II, the federal government imposed wage and price ceilings. To get needed workers, war plants had to offer noncash compensation that skirted the wage limits. These included transportation, meals and employer-paid fringe benefits such as health insurance.
These lessons of history apparently have not made much of an impression on the minds of legislators. Some might argue that the current situation is different. Nursing home revenues are largely fixed. Over half of all patients’ costs are paid by the state. And the state has passed laws prohibiting any particular institution from charging private patients more than it does those on public rolls.
With revenues limited, nursing homes cannot pay high enough wages to keep fully staffed on a permanent basis. Nor can they afford to pay the higher-cost temporary agencies in the long run. So they sought relief from the state.
The home operators, members of the Human Services committees in the Legislature and administrators in the Department of Human Services all seem to have identified the temp agencies as the problem. Some openly described these agencies as “parasites.”
But hundreds of years of economic history teach that if some business springs up, it probably is meeting a market need. It is expensive for nursing homes to keep large enough staffs so that they never need temporary help. And there are people who want to work in nursing homes, but who prefer not to work for the pay or under the schedules and terms offered by the homes. Temp agencies perform a useful social function in bringing these groups together.
High or rising fees charged by such agencies were a market signal that labor was scarce. The Legislature chose to ignore that signal and simply shoot the messenger instead. Now some of the legislators involved are already backpedaling and saying that they may have to revisit the issue in the 2002 session.
In the meantime, people who preferred to work through the agencies will seek other opportunities. Some may choose to return to full-time employment at some nursing home. Others will seek different employment opportunities. Some temp agencies may go out of business. And it is highly likely that nursing homes will still be short of workers.
We may not have any “parasites” making a living from providing temp workers. But who will take care of my mother and all the other parents who are spending their last years in these institutions?
© 2001 Edward Lotterman
Chanarambie Consulting, Inc.