2008 March 23 Sunday
Rising Medical Benefits Costs Depressing Wages

One of the reasons median incomes aren't rising is that more employer labor costs are going to medical insurance.

Recent history has not been kind to working-class Americans, who were down on the economy long before the word recession was uttered.

The main reason: spiraling health-care costs have been whacking away at their wages. Even though workers are producing more, inflation-adjusted median family income has dipped 2.6 percent -- or nearly $1,000 annually since 2000.

This isn't new news. But is it a good or bad trend?

Employees and employers are getting squeezed by the price of health care. The struggle to control health costs is viewed as crucial to improving wages and living standards for working Americans. Employers are paying more for health care and other benefits, leaving less money for pay increases. Benefits now devour 30.2 percent of employers' compensation costs, with the remaining money going to wages, the Labor Department reported this month. That is up from 27.4 percent in 2000.

But if total compensation was rising more rapidly then the rising cost of medical benefits would not so easily swamp the effects of rising output.

Poor people don't buy medical insurance. But even over $15 an hour the rate of getting health insurance is quite high.

While about three out of four full-time workers who earn $15 an hour or less have access to health-care coverage on the job, just over half buy it, according to a report by the Bureau of Labor Statistics. Many analysts say that the cost -- lower-wage workers pay about a third of the plan premiums with employers picking up the rest -- discourages many from having coverage. By comparison, nine out of 10 full-time workers making more than $15 an hour have health coverage available, and overall almost three in four are covered by their jobs.

The huge flood of low skilled Hispanic immigrants (both legal and illegal) is expanding the ranks of the poor and disproportionately boosting the number who do not have medical insurance.

Among people under age 65, minorities were substantially more likely than whites to lack health insurance. For all Hispanics under 65, 37.7 percent were uninsured, compared to 20.2 percent of black non-Hispanics and 14.9 percent of white non-Hispanics (Figure 2). Although 68.4 percent of non-elderly Americans were white non-Hispanics, they accounted for only 54.3 percent of uninsured persons (Figure 3). Among males under age 65 (Figure 4), being uninsured was more likely among Hispanics (39.9 percent) than among black non-Hispanics (21.3 percent) or white non-Hispanics (15.7 percent). Similarly, among females under 65, being uninsured was more likely among Hispanics (35.5 percent) than among black non-Hispanics (19.2 percent) or white non-Hispanics (14.2 percent).

This results in more government spending on medical care. Immigration expands the welfare state. Immigrants who have low productivity make society as a whole worse off.

Share |      By Randall Parker at 2008 March 23 09:59 PM  Economics Living Standards

tommy said at March 24, 2008 2:44 PM:

Unfortunately, it appears that our nation's health care system will also have to shoulder an increasing number of obese Mexicans due to illegal immigrants and their high fertility rates. Given the significant Indian ancestry of most Mexicans, particularly from the lower classes of Mexico, that will eventually mean a substantial population of Hispanic diabetics in the U.S.

HellKaiserRyo said at March 24, 2008 8:14 PM:

Too bad that they are Catholics if you know what I mean...

Kenelm Digby said at March 25, 2008 4:17 AM:

Isn't it strange that a supposedly 'poor' people in a 'poor' country have enough ready cash to stuff their greedy little faces to the max.

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