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Comment by nradov | Hacker News Reader

Actually real wages have increased a lot since the 70s if you count employer contributions to employee heath insurance. The problem is that a lot of that money is being wasted by an inefficient healthcare system, and employers probably shouldn't even be involved in sponsoring group health plans in the first place.

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Employers paid for healthcare in 1970s too, and even for higher percentages of the workforce. If there is a premium inflation surpassed the CPI, that is still inflation, not real growth. If there’s an inflation problem in delivering a temporally comparable service, that is not a “real wage” item for the employee [1]. So what the nominal figure today shouldn’t be relevant.

I agree it shouldn’t be an employer item too, but whatever employers lose on premiums, they get more on an overall stickier and cheaper labor supply.

[1] one could argue the productivity of healthcare increased, and the data indeed supports this with the overall life expectancy increase from 70s to now mid 70s plus quality of life treatments. But again most of the spend is actually on the tail end at this age group, which raises the workers’ premium without delivering the benefit. Therefore not much structural gain for the actual working age employee.

I don't understand your point. Very few people in their 70s have employer sponsored group health insurance. Most are only on Medicare, perhaps with a commercial Medicare Advantage or Medicare Supplement plan.

My bad, skipped a chain of thought there. Since medicare pays less than private insurance, hospitals can and do shift costs (which in reality is "opportunity cost of profit") to the latter, which pushes to private premiums up. Regardless, this is a minor effect. Very little of the inflation is justified with productivity gains, as you said it is a very inefficient healthcare system. US prices clock 2x-4x of comparable OPEC peers, admin percent is higher etc.

>if you count employer contributions to employee heath insurance

You shouldn't.

>and employers probably shouldn't even be involved in sponsoring group health plans in the first place.

They are free to lobby for socialized medicine, but they don't because they like how the current system helps lock employees into bad jobs for any amount of healthcare.

If you're trying to understand changes in the share of income going to workers versus employers, then you must count those contributions. For the average family, employers pay $20,143 annually in premiums: https://www.kff.org/affordable-care-act/annual-family-premiu....

From the perspective of the employer, that's real money, no different than if they had paid the $20,143 directly to the employee as wages. It's not the employer's concern what happens to that money after they fork it over.

Maybe people would view it more like that if they actually had the option to get paid cash instead of an insurance plan of the same supposed value. With some employees that is possible to negotiate, but for the vast majority of employees with a healthcare plan that is a big no unless they are willing to accept a tiny fraction of the insurance value.

> You shouldn't.

The correct number to use is called "total employee compensation". This includes:

1. salary

2. paid days off

3. health care benefits

4. retirement benefits

5. employer 401k contributions

6. incentive stock plans

7. taxes paid on behalf of the employee (such as the so-called employer's contribution to social security)

8. free food in the company cafeteria

9. any other benefits that cost money

The cost to employers for these benefits adds about 30% to total employee compensation.

Having an office for them to work at is also important and costs money.

That's true, but I only listed things that are part of employee compensation.

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