by Mitch Kokai
Senior Political Analyst, John Locke Foundation
Rising health care costs are contributing to the growth of income inequality, according to a report from the Mercatus Center.
“Most employers pay workers a combination of earnings and benefits, which include retirement plans and health insurance coverage,” the report said. “If benefits become more expensive, earnings growth will suffer.”
The group, using data from the Bureau of Labor Statistics, concluded that employer-provided health care benefits have grown much more rapidly than earnings, which has led to rising inequality.
The bureau’s data shows that from 1999 to 2006 the cost of employer health insurance coverage for low-wage workers rose from 6.2 percent to 12.2 percent, an increase of almost 97 percent. During that same period, wages for this group rose by only 28 percent.
For the top one percent of earners, health care costs grew from 4.0 percent to 4.3 percent from 1999 to 2006. “Because healthcare is a smaller share of total compensation for top earners, their earnings grew nearly as quickly as their compensation—35 percent for earnings and 36 percent for total compensation—and faster than earnings grew in the lower earnings percentiles.”
“Though rising healthcare costs eat away at wage growth for everyone, the effects will be largest for the working and middle class because their healthcare costs are so large relative to the rest of their compensation package,” the report said.