A Return to the Wage and Benefits Issue

A few weeks ago, I commented about a post at the Skeptical Optimist which claimed that though wages are stagnant, its costing employers more to provide benefits which means we’re all getting more in total compensation.

I noted that the percentage of Americans with employer provided health insurance is declining… which leads to this argument: if fewer people get a benefit that is more costly to provide, it doesn’t mean that more people are better off.

I wandered over to the Skeptical Optimist site yesterday and found a link to my post, and this response:

In the three days since I posted the article below this one, I’ve had to revise my opinion about employee benefits. Specifically, I’ve had to revise downward my estimate of the number of people who actually consider them beneficial to employees.

My assertion in that article was that when an employer pays an expense for an employee—one that would otherwise have been shouldered by the employee—that is “compensation” that is ignored when one talks of “wages” in isolation. The reaction, most of it coming from those who apparently would rather keep the discussion of workers’ compensation confined to money wages (my educated guess: for political reasons), ranged from honest objections at this blog, all the way to primitive name-calling—ironically, by people who prefer to remain anonymous—at other blogs.

But, as I said, I’ve had to revise my estimate. Benefits apparently aren’t benefits to those whose political talking points get more difficult if employee benefits are assumed to benefit employees. If the cost of health insurance increases, and a company pays part or all of the increase, guess what: that doesn’t “benefit” the employee; sure, it cushioned the blow, or even eliminated it, but somehow that’s not good enough to be classified a “benefit.” (Makes one wonder how many employers realize that any extra money they’d pay out for health insurance cost increases would not be considered of “benefit” to their employees.)

How difficult is it to understand? A benefit, no matter how costly to provide, that someone doesn’t receive is not a benefit to them. Those who are not getting health insurance from their employer any more are not better off because the insurance provided to the executives is getting more expensive to provide. In fact, that employee is worse off two ways – he/she lost his/her insurance, and now has to pay his/her higher healthcare costs.

But the Skeptical Optimist still has another argument up his sleeve:

I’ve been called an “idiot” for that thought process; if it’s true, I’m in good company. A brief search turned up a column by George Will from last year: Prosperity Amid the Gloom. Here’s an excerpt:

It is said that workers’ compensation has been stagnant. But to tickle that bad news from the statistics you must treat “compensation” as a synonym for wages, and then ignore the effect of taxation on individuals’ well-being.

Kevin Hassett and Aparna Mathur of the American Enterprise Institute, writing in National Review, say annual wage growth since 2000 has been 0.6 percent, but the annual increase in real hourly compensation, including benefits — and if you do not include them, why are they called benefits? — has been 1.3 percent. And taxes — particularly those paid by middle-class families with children — have declined substantially.

I don’t think I called the SO an idiot. That must have been someone else. But the fact that he’s got George Will agreeing with him on wage issues, or looks approvingly at Kevin Hassett does make me wonder.

Update… I correct the link to the data on employer provided health insurance figures. And I’d like to add a point…

Turns out I was wrong… its not “employer provided” – its “employment based” health insurance. Here’s the definition of that:

Employment-based health insurance is coverage offered through one’s own employment or a relative’s. It may be offered by an employer or by a union.

And as noted above, the percentage of Americans with employment-based health insurance is dropping.