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The impact of employer payments for health insurance and social security on the premium for education and earnings inequality

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  • Jane Sneddon Little

Abstract

The trend toward increased wage and income inequality that emerged in the 1980s—with "the rich getting richer and the poor poorer"—has attracted a great deal of attention and concern. One aspect of this phenomenon has been the growing premium for education, with the disparity between the wage and salary earnings of the least and best educated rising since 1979. A related observation involves the increased earnings inequality among similar workers, which occurred in the 1970s as well as the 1980s.> This exploratory article seeks to broaden the discussion by asking whether the rising cost of employer-provided health insurance and employer payments for FICA taxes has contributed to the growth in observed and actual inequality among workers over this period. The author examines published and unpublished data from the Current Population Survey for men working full-time and year round. She finds that the decreased availability of jobs with health benefits has had a particularly severe impact on less-skilled workers. As a result, the compensation of full-time male workers has actually become substantially more unequal since 1979 than the traditional measure based on wages alone indicates.

Suggested Citation

  • Jane Sneddon Little, 1995. "The impact of employer payments for health insurance and social security on the premium for education and earnings inequality," New England Economic Review, Federal Reserve Bank of Boston, issue May, pages 25-40.
  • Handle: RePEc:fip:fedbne:y:1995:i:may:p:25-40
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    File URL: http://www.bostonfed.org/economic/neer/neer1995/neer395c.htm
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    File URL: http://www.bostonfed.org/economic/neer/neer1995/neer395c.pdf
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    References listed on IDEAS

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    1. Blanchard, Olivier J, 1984. "The Lucas Critique and the Volcker Deflation," American Economic Review, American Economic Association, pages 211-215.
    2. Kim B. Clark & Lawrence H. Summers, 1979. "Labor Market Dynamics and Unemployemnt: A Reconsideration," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, pages 13-72.
    3. George L. Perry, 1970. "Changing Labor Markets and Inflation," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, pages 411-448.
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    Cited by:

    1. A. M. Wolaver & T. D. McBride & B. L. Wolfe, "undated". "Decreasing Opportunities for Low-Wage Workers: The Role of the Nondiscrimination Law for Employer-Provided Health Insurance," Institute for Research on Poverty Discussion Papers 1124-97, University of Wisconsin Institute for Research on Poverty.

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