Stagnant Wages and Health Insurance

2011 October 2
by SJ Leeds

You’re going to notice some changes in the blog during the next few months.  You will see shorter (hopefully more frequent?) blogs. I’m hoping to send out one interesting slide, idea or factoid each week (without the long summaries or commentaries).  The reason for this is that I’m in a very busy stretch – I’m writing a new class at school.  The class will be about the long-term issues that will affect the markets (sovereign debt, the deficit, Social Security, healthcare).  I’m really looking forward to this…but it’s a lot of work.  On to today’s thought for the day…

We’ve heard recent reports about stagnant wage growth and the ramifications.  Of course, if I’m not earning more, it’s hard for me to spend more…unless I borrow money.  Most Americans are not going to be able to borrow more – so what does that tell you about the next few years?

There are many reasons for stagnant wage growth, but here’s one factor: health care costs.  Since 1999, health insurance premiums have increased 160%!  (Employee contributions have increased 168%.)  Employers don’t want to raise salaries when they are already paying more for our health insurance.  Of course, employees are also paying more.  See Chart.


The Kaiser Family Foundation reported that the average annual premium for family coverage through an employer is $15,073 in 2011 – a 9% increase from 2010!  See slide below.


In addition, half of workers at small firms now have deductibles of $1000 or more.  In 2006, that was 16%!  At large firms, the number has grown from 6% to 22%.  See chart below.


Another real problem that results from this situation is that lower level employees become prohibitively expensive.  It’s hard to hire someone for $20K when insurance will drive the cost to $35K.  It’s much easier to outsource this job in many cases.


Have a good week.


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