August 30, 2004
Survey: Employee Health Benefits to Shrink
This article notes that employers are looking to hold the increase in benefits to 10%. To accomplish this, the employers will be increasing deductibles, co-pays and eliminating certain benefits altogether.
Still even with a 10% increase in benefits this will mean that wages will increase at a lower rate or perhaps even decline in some instances. This is why I think the complaints that wages are stagnant and/or declining are disingenuous (here is a nice example--also note the economic illiteracy in the quoted section: inflation adjusted wages exhibiting a positive growth rate are growing at a rate in excess of the rate of inflation).
Anyhow when we look at the data on total compensation from the Bureau of Labor Statistics we see the following,
I don't know about you, but I see the hourly compensation data increasing from 1995 on. Could the story linked above about the paltry rise in the wage and the increases in total compensation be linked? Could the increase in benefits be squeezing the wage rate as firms attempt to ensure profits?
Posted by Steve at August 30, 2004 11:42 AMA more interesting graph would have also shown the components of employee compensation. When broken out as wages, health care benefits, other benefits, I suspect a somewhat different picture might emerge.
How many employees these days don't have fat benefit packages (sole proprietors, mom-and-pop shops, etc.)?
Posted by: Dave Schuler on August 30, 2004 12:36 PMI wonder if part of the 'jobless recovery' has to do with total compensation increasing despite the economic troubles. It is not clear from the graph, but it appears that compensation was flat and then actually declined in the recovery of the early 90's - could this have led to the economic boom (particularly high employment) of the late 90's? Just some questions from a non-econ guy.
Posted by: dylan on August 31, 2004 10:56 AMdylan,
Well having total compensation remaining fairly flat certainly doesn't hurt the employment picture. What the above graph is telling us is that the real cost of adding employees went up. Basic economic theory tells us that as the price of something gets higher (all other things constant) then the demand for that thing decreases.
Posted by: Steve on August 31, 2004 11:13 AM