Industry Figure Tom Chappell

Princeton economist Paul Krugman had a great column in The New York Times the other day about Toyota’s recent decision to build their new RAV4 factory in Ontario.

On the face of it, it’s a mystery: if a company were going to build a factory, with its large number of good middle-class jobs, anywhere in North America, why wouldn’t it pick the country that is tripping over itself to roll back taxes, corporate regulations, and indeed, the entire 20th century? Southern states like Alabama offered Toyota incentives worth hundreds of millions of dollars. So why choose The Great White North over Cleetus the Slack-Jawed Yokel?

Toyota said the main reason was the quality of Ontario’s work force. Canada’s Automotive Parts Manufacturers’ Association snickered that Japanese trainers in existing Alabama plants had had to produce “pictorials” to instruct illiterate workers on the correct operation of complicated equipment.

The thing that is so wonderfully ironic about this is that Alabama voters resoundingly rejected a plan by their governor, two years ago, to increase taxes on the wealthy so that the state could afford to improve its crappy public schools. I remember this from when it was in the news at the time; he was making desperate, desperate pleas to voters to enact the tax. But, as usual, the cynical right wing convinced voters that the tax “would cost the state jobs.” Ha ha!

BUT EVEN MORE INTERESTING is Mr. Krugman’s discussion of the impact of Canada’s well-known national health care system on the decision. For one thing, Canada’s system produces better outcomes, for [much] less money per patient, than the American system, so all other things being equal, it costs Toyota less to pay for employees’ health care (through payroll taxes) in the G.W.N. than it does for them to provide equivalent benefits to American workers.

So, good factory jobs, the kind that come with benefits, are comparatively cheaper up North, while crappy service jobs (e.g. Wal*Mart Greeter) that don’t come with health benefits in the U.S., are comparatively more expensive up there, since all workers, and even the unemployed, are covered under Canada’s plan.

Meanwhile, what’s our situation? It’s the worst of both worlds: our system encourages the creation of countless low-wage no-benefit jobs, leaving taxpayers to pick up health care costs for the low-skilled semi-employed, as well as for the unemployed who are left over when companies flee.

This isn’t even counting the lives that are destroyed through lack of health care, or by its enormous cost here — roughly half of the bankruptcies in this country are due to medical expenses. (But I’m told that to change our system would be horribly, horribly wrong.)

Full Column at The New York Times