Will lower healthcare costs result in higher wages?

[Elphaba]

I don't really have an opinion on this, but I thought some of you might find it interesting.

Ezra Klein - Will lower health-care costs mean higher wages?

There is, in other words, very good evidence that employers pass health-care savings onto employees. A Rand study by Dana Goldman, Neeraj Sood and Arleen Leibowitz examined a particular firm's response to a period of premium increases and found that "about two-thirds of the premium increase is financed out of cash wages and the remaining one-thirds is financed by a reduction in benefits." Another study by Katherine Baicker and Amitabh Chandra found that a 10 percent increase in premiums "results in an offsetting decrease in wages of 2.3 percent," which is fairly impressive given that income is much higher than health-care premiums.

There's good reason to think that if health-care costs can be tamed, wages will rise. But one of the big problems in health-care reform is that workers don't understand this connection. They think of health-care coverage as a "benefit," rather than a form of compensation engaged in a fairly zero-sum competition against their wages. . . .

The responses to this article are very interesting as well.

[hordak]

But the heath care still needs to be payed for in the form of taxes. If the paycheck is bigger due to lower heath care cost to the employer will it be enough of a raise to offset the tax increase?

[Loudmouth_Mormon]

I have an opinion - the red line on that chart is a bunch of hogwash. My healthcare costs have risen way more than 5-8% every year for the past 4 years. More like 10-15%. My insurance will go up 25% in January, with the same coverage.

[anatess]

My answer is NO. There are a lot more factors that go into wages than just healthcare coverage. But, there is a reason why I'm a contractor instead of an employee. It gives me the option to "cash out" my healthcare benefit. Gives me a choice. Employees don't have that choice.

[boyando]

It has been my experience, that there is only one thing that makes employers pay there employees more money. That would be an employee shortage.