But when we try to look at the net effect, it's hard to see much dynamism coming out of the places with a generous safety net. Rates of entrepreneurship and labor mobility are far lower in Europe than they are in America--and one of the many factors restraining European labor mobility is thought to be the social safety net, both because of the difficulty of moving between benefit system, and because the benefits lessen the urgency of say, relocating in order to find a job.
I will now speak at the level of personal anecdote; I beg the reader’s indulgence but I think it is a worthy point to make. I have lived in both the United States and Canada (as any reader of this blog will probably have figured out). At a purely personal level I am way more comfortable with economic risk when I am resident in Canada.
Why? Because the cost of a hospitalization is so high here in the United States as compared with elsewhere. There are two factors that I think are key. One is simply that medical care is intrinsically expensive here in the United States. But the second is the bargaining power of groups. Look at what the difference is between the billed price and what private insurance pays.
Now imagine that you feel dizzy one day. Dizziness can be a sign of a stroke or a heart attack. But if you are unemployed and not covered then what do you do? Visiting the hospital is a guarantee of some sort of economic crisis. But many events can be stopped with early treatment (or at least highly mitigated).
If we had the features of an efficient market, that would be different. But has anybody ever tried to shop around for better prices in the midst of a serious health event? Yet the United States links health insurance with employment. Furthermore, rescission tends to happen at the time of the event; in cases of gross fraud that is perfectly understandable but the examples of very minor book-keeping errors leading to rescission make one leery of not having somebody (like a large employer's HR department) around to advocate for you. Courts, while possible, are expensive at a time when you likely have no money.
Now this is not to say anything about elective procedures or non-urgent medicine; things like elective eye surgery can be areas that markets can exist. But we can already see this in Canada with things like diagnostic scans (that are not time sensitive) are increasingly handled by private firms in Canada (often paid out of pocket) for a surprisingly low cost to the consumer. The same with laser eye surgery or some forms of bariatric surgery. So a mixed economy is possible.
So I have been a lot more concerned about being employed in stable position here in the United States. In Canada I have considered (and applied for) short term and unstable positions: many of which were a lot more entrepreneurial.
After all, correlating employment risk (i.e. loss of job) with medical care cost risk (when insurance is linked to your job) seems like a bad decision. As for why we don’t see this in Europe – I have no idea. But it’s not clear that the European example is conclusive.
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