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

25 Pages Posted: 24 Sep 2011 Last revised: 10 Oct 2011

Mark J. Warshawsky

Towers Watson

Date Written: September 22, 2011

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increase in the cost of health insurance benefits provided to workers by employers, according to calculations using unpublished data provided by the Bureau of Labor Statistics.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.

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

JEL Classification: D31, J32, H55

Suggested Citation

Warshawsky, Mark J., Can the Rapid Growth in the Cost of Employer-Provided Health Benefits Explain the Observed Increase in Earnings Inequality? (September 22, 2011). Available at SSRN: https://ssrn.com/abstract=1932381 or http://dx.doi.org/10.2139/ssrn.1932381

Mark J. Warshawsky (Contact Author)

Towers Watson ( email )

Arlington, VA
United States

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