Wednesday, December 19, 2012

Nice graph showing a major source of wage stagnation in the US--It is all about healthcare costs...

Well, maybe not all, but...The graph below tells part (don't know if it is a big or small part) of the story regarding income inequality and stagnant wages for workers. 

The orange line (+147% to the right--since year 2000) shows the percentage change in employee contributions to maintain their health insurance policies.  The blue line shows the percentage change in the actual cost of those policies (+114%  since year 2000).  The black line shows the percentage change in wages (36% since 2000). The gray line shows the Consumer Price Index percentage change (27% since 2000).

Source: Kaiser Foundation
The employer paid portion of health insurance is considered a "non-wage" benefit .  You pay some of the cost of your health insurance  (it comes out of your wages/salary) and your employer pays some of it (a non-wage benefit to you).  Example: a policy to cover you and your family has a total cost of $5,000.  You pay $100 per month out of your paycheck for the policy ($1,200 per year total) and your employer pays the remaining $3,800 on your behalf.  $3,800--your non wage benefit BUT a cost to your employer to employ you.

The difference between the orange and blue lines represents "cost shifting" of the total cost of employer provided health insurance.  Employees are paying more for health insurance from their wages (that IS clear) since 2000 and employers are either (1) paying less than they did before or more likely (2) passing the increasing cost of providing health insurance to employees in total or in part.

Two ways of looking at this.

(1) Any discretionary income gains that might have accrued to workers in the form of higher wages since 2000 have been absorbed by overall rising health insurance costs.  Employers are held harmless in this situation.

(2) Corporations have been shifting the cost of insurance onto workers and are not carrying more of the burden.  Paying less in non-wage benefits means more money going to the bottom line.

You tell me.  I can't figure it out.
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