From The Heritage Foundation:
InsiderOnline Blog: January 2012
Rising Health Care Costs Increase Inequality in Take-Home Pay
Rising health care costs appear to be a major part of the explanation for increased inequality in cash compensation among workers. In the Winter 2012 issue of Regulation, Peter Van Doren summarizes some recent research:
Employers may be paying all their employees a more or less equivalent increase on a percentage basis, but for lower-paid workers much of that pay is not showing up in cash. Thus, if this view is correct, inequality in the cash component of compensation has increased while inequality in total compensation has not increased because the fixed costs of health insurance are a much larger percentage of the total compensation of lower-earnings workers. […]
If one analyzes data on only working-age individuals (age 25–61), inflation-adjusted real pre-tax, post-cash-transfer money income grew 1.9 percent and 10.5 percent respectively for the first (poorest) and 10th (richest) deciles from 1995 to 2008. But if one adds the value of health insurance, the first (poorest) decile grew 12.3 percent while the top decile grew 11.7 percent.
Our health care system shields health care consumers from bearing the cost of their consumption directly, and the tax preference for employer-provided insurance plays no small role there. This problem has grown over time, but rather than examining how such inducements to overconsumption (and thus rising costs) increase inequality in take-home pay, critics claim there is something wrong with labor markets that requires further government interventions. Maybe less government intervention is the solution.
Posted on 01/06/12 04:46 PM by Alex Adrianson
Blog Archive
InsiderOnline Blog: January 2012
Rising Health Care Costs Increase Inequality in Take-Home Pay
Rising health care costs appear to be a major part of the explanation for increased inequality in cash compensation among workers. In the Winter 2012 issue of Regulation, Peter Van Doren summarizes some recent research:
Employers may be paying all their employees a more or less equivalent increase on a percentage basis, but for lower-paid workers much of that pay is not showing up in cash. Thus, if this view is correct, inequality in the cash component of compensation has increased while inequality in total compensation has not increased because the fixed costs of health insurance are a much larger percentage of the total compensation of lower-earnings workers. […]
If one analyzes data on only working-age individuals (age 25–61), inflation-adjusted real pre-tax, post-cash-transfer money income grew 1.9 percent and 10.5 percent respectively for the first (poorest) and 10th (richest) deciles from 1995 to 2008. But if one adds the value of health insurance, the first (poorest) decile grew 12.3 percent while the top decile grew 11.7 percent.
Our health care system shields health care consumers from bearing the cost of their consumption directly, and the tax preference for employer-provided insurance plays no small role there. This problem has grown over time, but rather than examining how such inducements to overconsumption (and thus rising costs) increase inequality in take-home pay, critics claim there is something wrong with labor markets that requires further government interventions. Maybe less government intervention is the solution.
Posted on 01/06/12 04:46 PM by Alex Adrianson
Blog Archive
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