Google & day-care: a parable for our times
By civil truth Posted in Archived — Comments (5) / Email this page » / Leave a comment »
The New York Times carried an article today about the turbulent waters that Google has fallen into regarding its in-house day-care program, which it has discovered is getting too expensive compared with the fees it has been assessing its employees.
The NYT author titled his article On Day Care, Google Makes a Rare Fumble, presumably on the basis that Google had overriden the findings of its focus groups and had upset its employees by planning to sharply increase the prices it charges its employees for day care.
Actually, (although this is not the author's intent) this story is a parable for the education sector and/or a parable for one-payer healthcare/Medicare.
The key lies in the second paragraph (emphasis mine):
Parents who had been paying $1,425 a month for infant care would see their costs rise to nearly $2,500 — well above the market rate. For parents with toddlers and preschoolers, who were charged less, the price increases were equally eye-popping. Under the new plan, parents with two kids in Google day care would most likely see their annual day care bill grow to more than $57,000 from around $33,000.
So faced with the fact that Google's child care system is costing more than its competitors, what does Google do? A sensible company that wanted to stay in the business might conside lower costs. But that doesn't appear to be on the table.
A second sensible response would be to introduce a cafeteria plan or some other voucher system where parents could choose whether to continue to enroll in Google's child care program or to spend these benefits by utitilizing competitors' programs. Especially since one-size does not fit all. (Contrary to what some guys think, but I digress...)
As I read the remainder of article, though Google clearly is one of those guys: they decided to reduce choice further by eliminating alternatives and now offers just a single, one-size-fits-all child care program. In its infinite wisdom, the company has decided that it knows what is the "best" day care system for all their employees and will only offer that to them. Evidently they believe that their employees are unable to figure out the best day care choice for their own children.
That arrogance was too much even for the NYT article's author.
Surprise! Google's subsidy resulted in demand exceeding supply, which translated to lengthy waiting lists for employees to get their children into the program. Or to look at it another way, they rationed day care by restricting supply. Just like health care in Canada and Britain.
Google's solution to wait lists was to drive people away, to reduce the numbers on the wait list by charging people to keep their names on the weight list. As the article observed, that tactic worked (Economics 101), which now allows Google to look like heroes when they open enough new spots to accomodate the 300 survivors.
In conjunction with raising prices, Google plans to offset the pain by creating a needs-based scholarship programs (sounds like the way people have been running universities for many years). Given that university tuitions have long risen substantially higher than the rate of inflation, this scholarship plan doesn't look too promising regarding controlling future price increases.
Is there any bad idea that Google isn't trying?
Well, at least Google had the sense to avoid creating a one-payer or Medicare-like system of financing.
Or perhaps one-payer is the analogy to what Google has been doing all these years, and they finally realized that it's a path to financial ruin. Would only our politicians in Washington take heed to Google, if they don't want to pay attention to what's happening in Canada and Britain and Europe, where recognition has surfaced that government-owned health care leads to rationing and inferior care.
The NYT author, to no one's suprise, of course, argues for Google to create what would be analogous to a "public school" approach, that is, to run a mediocre day care program so that everyone can afford it - an equality of misery, which is the Socialist Democratic Party's approach to domestic issues. Not surprisingly, the NYT editorially seems to favor such approaches.
However, the idea of Google getting out of the day care business itself seems unthinkable. Nor does Google even want to allow its program to face competition by providing "vouchers" that would enable parents to choose the day care situation that works for them - that would seem to be too much a violation of the leftist dogmas to which its owners subscribe.
A free market solution in Google's eyes: The Horror! The Horror!
cross-posted at And Rightly So!
In most places and for most people it is lightly regulated and often operates below the tax radar as well. When it moves into the more formal world of being employer or government provided, the costs simply skyrocket and only the most well off can afford it. Unless they are earning very high incomes, even at the lower cost options, one parent of a young child is working for little more than their healthcare and retirement until they get the kid to the government babysitter, the public schools.
In Vino Veritas
then it seems they'd be keen to spend a little more on demonstrating a progressive model for the day care of the future.
One other issue with this. As a person with no children, I've never understood how a company can justify giving a subsidy for child care. This isn't the government, this is a company. If you give employee A a discount on a service you're paying that employee more. If I'm employee B who doesn't have a need for that service, I'm not gonna be real happy unless you give me $ equal to the value of the service.
Frankly, the same goes for healthcare. The system would make a lot more sense if employees paid for their healthcare rather than the employer. And I bet healthcare costs would go down quickly as employees realized that selecting a slimmed down plan meant more $ in the pocket every paycheck.
All employees are given an equal amount (or possibly percentage) of pre-tax dollars and a "cafeteria" selection of possible benefits, from which they can select the combination of benefits that works best for them. People needing child care can get pre-tax savings there, while others might put more into a 401k retirement plan.
The health and child care benefits, for instance, would essentially be credits against their private health and child care programs that they contract with, so the employee doesn't have to provide one-size fits all comprehensive health plan for everyone that will be unnecessarily costly for the company (and thus take away $'s as you note).
And since these are pre-tax benefits, employees have a lower AGI leading to lower taxes. Everyone benefits all around.
There are other market-oriented alternative too that will benefit employees more than subsidies.
Google, however, evidently doesn't like a free market approach.
Well, they are very good at search, datacenter architectures and the webpage ad business. Buying Keyhole (aka Google Earth) was a cool move, even if it was kind of a rip-off of Terraserver. Day care -- evidently not their core competency.