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February 21, 2008
Wages Falling as Percentage of Total Compensation
Recent analysis by the Kaiser Family Foundation reveals that the share of employee compensation going to health benefits has risen substantially, while the share for wages has fallen.

In its most recent Health Care Costs Snapshot report, "Wages and Benefits: A Long-Term View," Kaiser examines the growth in employer costs for private group health benefits compared with wages and other benefits.

The report explains that health insurance premiums rose 78% between 2001 and 2007 while workers' earnings rose 19% by comparison. (During the same period, general inflation rose 17%.) It further illustrates how health care costs have skyrocketed historically: the total amount spent by employers on group health insurance policies grew from an average of $36 billion per year during the 1960s to $465 billion per year during the 2000s--and was $536 billion in 2006 (the most recent year covered in the analysis).

Wages have remained the largest component of total employee compensation during the same period (1960-2006). However, they have fallen as a percentage of total economic activity, or gross domestic product (GDP)--from 51.8% in 1960 to 45.6% in 2006. Conversely, health benefit costs have increased in the same period from 0.6% to 4.1% of GDP.

In addition, "employer payments for health benefits have increased as a share of total employee compensation in each decade" the report notes--from an average of 1.4% in the 1960s to 7.2% in 2006, while the share going to wages has fallen.

Kaiser concludes that health care expenses aren't only a burden on people "directly when they use medical goods and services" but may also "affect families' well-being by slowing the increase in their paychecks each year."

Source: Kaiser Family Foundation

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