Wage Gains Wiped Out By Health Care Cost Increases

The rising cost of healthcare premiums has erased any other gains in median household income and in fact is responsible for why household income in the U.S. has fallen by $5,000 over the past 12 years, reports the Milwaukee Journal Sentinel.

The U.S. Census Bureau said recently that median household income fell to $50,046 last year, down from $54,964 in 1999 after adjusting for inflation. A separate survey found that the cost of employer-paid health care insurance rose 160 percent over the same time period.

Economists say that the money that would have gone to giving employees raises is instead being funneled into paying for health care.

“Workers ultimately bear the cost, and they bear the cost in lower wages,” Katherine Baicker, an economist and professor at Harvard University, told the Journal Sentinel. “When health care costs go up and health insurance premiums go up, workers’ wages rise less quickly than they would otherwise.”

According to the Kaiser Family Foundation, a family health insurance plan costs, on average, $15,073 per year per employee. The employer pays a little more than two thirds of that cost, on average.

Your salary raise is going straight into that $10,944 paid by your employer.

Now, while this is all a bit fuzzy (after all, as one economist said, “It’s not as though health insurance costs rise by a dollar today, your take-home pay is a dollar less tomorrow,”), health economists recently published a peer-reviewed paper in the journal Health Affairs that found much the same result: A family’s gains in income from 1999 to 2009, after accounting for inflation, were completely wiped out by the increased costs of health care.

Recommended articles