How healthcare costs impact your wages

While the economy expanded greatly between 2010 and 2020, many Americans wages remained stagnant.  There are many reasons for this, but I believe one major factor is the rising cost of health insurance.

The true cost of health insurance is typically hidden from employees.  Employees may pay 20-50% of their health insurance costs and typically this comes out of their check via a bi-weekly deduction.  Many employees don’t even look at these deductions.  But hidden in that calculation is a major reason why wages have remained stagnant in an expanding economy.

According to the Kaiser Family Foundation, the average total annual premium for single coverage in 2018 in an Employer –Sponsored Medical plan was $6,715.  For perspective, five years earlier in 2013, this figure was $5,571.  This represents a nearly 21% increase in five years.  According to the United States Census Bureau, the median household income in the US was $61,937.  According to the Bureau of Labor Statistics (BLS), the median wage for works in the United States was $47,060 in 2018. 

This means that merely to pay for the health insurance for an employee, an employer must contribute 10.8% of that employee’s wage.  Keep in mind, the employee still has out of pocket costs for items like copays and deductibles.   

In summary, employees are getting raises, they are just coming in the form of more and more expensive health insurance plans rather than take-home pay.   But, employees have largely been resistant to any changes to their healthcare.  Until employees make the link between out-of-control healthcare costs and the stagnation of their wages, it will be hard for employers to mobilize.