Klein smackdown watch: health-care and wages
EPI's Larry Mishel has a new paper arguing that changes in health-care premiums do not drive changes in wages. He names me as someone arguing otherwise, and he's right to do so: Looking back over the paragraphs he quotes, they certainly sound like I'm saying wage changes are simply the product of changes in premium costs.
As Mishel says, that's obviously not true. Health-care costs aren't big enough to drive wages. For instance: This year, health-care costs will grow very slowly because we're in a recession. But that doesn't mean wages will rocket upwards. Quite the opposite, in fact.
That doesn't cancel out the fact that there is a much larger tradeoff between premium increases and wages than workers understand. Imagine a worker making $55,000, and whose employer pays for a $14,000 health-care plan for the worker and his family. If health-care costs grow by 10 percent that year, that's $1,400. Assume the worker pays a bit of his plan's costs out-of-pocket and the employer is actually spending $1,100 keeping up with premium increases. That's $1,100 that's going to that worker's compensation, but not to his wages. Over the years, that sort of thing adds up, and workers never even know that it's happening. That essential ignorance is a serious problem in the health-care system.
But as Mishel says, it certainly doesn't add up to the entirety of all wage changes for all workers. If I gave folks the opposite impression, that was poor writing on my part. Apologies.
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