Can the Rapid Growth in the Cost of Employer-Provided Health Benefits Explain the Observed Increase in Earnings Inequality?

Abstract:     
Newly available data on earnings from the Social Security Administration indicates that earnings growth for lower earning workers lagged that of higher earning workers over the period 1999 through 2006. Most of this lag can be attributed, however, to the rapid increase in the cost of health insurance benefits provided to workers by employers, according to calculations using unpublished data provided by the Bureau of Labor Statistics. This finding is broadly supported by other studies in this area covering longer periods. The consistent growth of compensation across earnings percentiles up to the highest fractiles, in contrast to earnings growth, may be a particularly important empirical result for recent policy debates and legislation.

Number of Pages in PDF File: 25

Keywords: Earnings inequality, health insurance, Social Security, employee benefits, compensation

JEL Classification: D31, J32, H55

working papers series