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My completely unscientific theory is that all the money that would otherwise have been allocated to wage increases has been eaten up by skyrocketing healthcare

My completely unscientific theory is that all the money that would otherwise have been allocated to wage increases has been eaten up by skyrocketing healthcare costs. I haven't actually looked at whether this is true though.

simonsarris 9y ago
You're generally right. Total comp has increased, not stagnated, but only because employers have shifted compensation from wages to benefits (like healthcare). Companies don't pay payroll taxes on those, so I assume they like this arrangement, even though it causes all sorts of problems when you couple job + healthcare. Healthcare is the new company car. Total compensation (including non-wage benefits): http://research.stlouisfed.org/fred2/series/RCPHBS http://research.stlouisfed.org/fred2/series/RCPHBS Cost index (attempts to control for composition changes): http://research.stlouisfed.org/fred2/series/ECICOM http://research.stlouisfed.org/fred2/series/ECICOM
- moorhosj 9y ago
  Meanwhile, corporate profits as % of GDP are historically high: https://fred.stlouisfed.org/graph/?g=fPLQ https://fred.stlouisfed.org/graph/?g=fPLQ
  - tryptophan 9y ago
    This can explained by the fact that US companies are doing an increasing share of their business in non-US countries.
    - moorhosj 9y ago
      Is the inverse of this not true? Are non-US companies doing more of their business in the US?
entee 9y ago
There's plenty of evidence to suggest it's a contributor: https://www.bloomberg.com/news/articles/2017-09-19/rising-health-insurance-costs-blunt-employees-paycheck-gains https://www.bloomberg.com/news/articles/2017-09-19/rising-he... Though given the extraordinary profitability of companies right now, surely not the only factor. Some of those profits could be redistributed to workers. Not sure how to do that without potentially causing damage though.
- moorhosj 9y ago
  Can you explain what "damage" it might cause? Giving labor a seat on the board seems like a logical, small step in this direction. Maybe a lower tax rate for Employee Owned Companies (ESOP's) would incentivize owners to spread some of these record profits.
  - ericd 9y ago
    Why should the government take the ideological view of favoring one type of company over another?
    - dragonwriter 9y ago
      > Why should the government take the ideological view of favoring one type of company over another? Because it does that inherently when it decides what form of business organization to allow in the first place. Corporations are creatures of government, not nature, by creating them and setting standards for what the rules are for governing them it is favoring a particular type of company. But taxing them and then creating a variety of more-or-less tax exempt categories with different behavioral restrictions it is favoring one type of company over others. Even if it chose not to charter corporations (or similar, newer types like LLCs) and only to allow sole proprietorships and partnerships, that would be favoring one type of company over others. The question is not whether the government should favor certain forms of business organizations -- there is no way that it can avoid that. The question is what forms it should favor and how.
      - 9y ago
skookumchuck 9y ago
All worker benefits and protections, legally mandated or not, come out of the worker's takehome pay, one way or another.
HankB99 9y ago
I think that has face validity. However I don't think that those who pay wages allocate a certain amount, pay benefits and then pay the rest as wages. More likely they pay a little as possible (both wages and benefits) to fill the jobs. (Econ 101...) I think a more likely factor is that automation has reduced the number of jobs relative to the size of the labor pool. In that situation more workers chasing fewer jobs will tend to drive wages down. (Again, elementary economics.) Another factor may be that large employers that dominate a labor market can exert downward pressure on wages that workers are not able to resist if there are not other jobs available. (Not IMO elementary economics.)
brownbat 9y ago
Almost like health insurance is some kind of Giffen good, or like some other economic sink, gobbling up alternative destinations for resources. Here's some random critical analysis on the topic: https://randomcriticalanalysis.wordpress.com/2016/09/25/high-us-health-care-spending-is-quite-well-explained-by-its-high-material-standard-of-living/ https://randomcriticalanalysis.wordpress.com/2016/09/25/high...
ajmurmann 9y ago
Mark Warshawsky of George Mason University's Mercatus Center was on Econtalk and had the same theory and numbers to back it: http://www.econtalk.org/archives/2017/01/mark_warshawsky.html http://www.econtalk.org/archives/2017/01/mark_warshawsky.htm... Edit: also interesting point Mark Andreesen made: we don't have too much automation, we have too little at least in some sectors. If things keep going as they are now, a TV will cost $10 and health insurance and college $1,000,000.

simonsarris 9y ago

You're generally right. Total comp has increased, not stagnated, but only because employers have shifted compensation from wages to benefits (like healthcare). Companies don't pay payroll taxes on those, so I assume they like this arrangement, even though it causes all sorts of problems when you couple job + healthcare. Healthcare is the new company car. Total compensation (including non-wage benefits): http://research.stlouisfed.org/fred2/series/RCPHBS http://research.stlouisfed.org/fred2/series/RCPHBS Cost index (attempts to control for composition changes): http://research.stlouisfed.org/fred2/series/ECICOM http://research.stlouisfed.org/fred2/series/ECICOM

moorhosj 9y ago
Meanwhile, corporate profits as % of GDP are historically high: https://fred.stlouisfed.org/graph/?g=fPLQ https://fred.stlouisfed.org/graph/?g=fPLQ
- tryptophan 9y ago
  This can explained by the fact that US companies are doing an increasing share of their business in non-US countries.
  - moorhosj 9y ago
    Is the inverse of this not true? Are non-US companies doing more of their business in the US?

entee 9y ago

There's plenty of evidence to suggest it's a contributor: https://www.bloomberg.com/news/articles/2017-09-19/rising-health-insurance-costs-blunt-employees-paycheck-gains https://www.bloomberg.com/news/articles/2017-09-19/rising-he... Though given the extraordinary profitability of companies right now, surely not the only factor. Some of those profits could be redistributed to workers. Not sure how to do that without potentially causing damage though.

moorhosj 9y ago
Can you explain what "damage" it might cause? Giving labor a seat on the board seems like a logical, small step in this direction. Maybe a lower tax rate for Employee Owned Companies (ESOP's) would incentivize owners to spread some of these record profits.
- ericd 9y ago
  Why should the government take the ideological view of favoring one type of company over another?
  - dragonwriter 9y ago
    > Why should the government take the ideological view of favoring one type of company over another? Because it does that inherently when it decides what form of business organization to allow in the first place. Corporations are creatures of government, not nature, by creating them and setting standards for what the rules are for governing them it is favoring a particular type of company. But taxing them and then creating a variety of more-or-less tax exempt categories with different behavioral restrictions it is favoring one type of company over others. Even if it chose not to charter corporations (or similar, newer types like LLCs) and only to allow sole proprietorships and partnerships, that would be favoring one type of company over others. The question is not whether the government should favor certain forms of business organizations -- there is no way that it can avoid that. The question is what forms it should favor and how.
    - 9y ago

skookumchuck 9y ago

All worker benefits and protections, legally mandated or not, come out of the worker's takehome pay, one way or another.

HankB99 9y ago

I think that has face validity. However I don't think that those who pay wages allocate a certain amount, pay benefits and then pay the rest as wages. More likely they pay a little as possible (both wages and benefits) to fill the jobs. (Econ 101...) I think a more likely factor is that automation has reduced the number of jobs relative to the size of the labor pool. In that situation more workers chasing fewer jobs will tend to drive wages down. (Again, elementary economics.) Another factor may be that large employers that dominate a labor market can exert downward pressure on wages that workers are not able to resist if there are not other jobs available. (Not IMO elementary economics.)

brownbat 9y ago

Almost like health insurance is some kind of Giffen good, or like some other economic sink, gobbling up alternative destinations for resources. Here's some random critical analysis on the topic: https://randomcriticalanalysis.wordpress.com/2016/09/25/high-us-health-care-spending-is-quite-well-explained-by-its-high-material-standard-of-living/ https://randomcriticalanalysis.wordpress.com/2016/09/25/high...

ajmurmann 9y ago

Mark Warshawsky of George Mason University's Mercatus Center was on Econtalk and had the same theory and numbers to back it: http://www.econtalk.org/archives/2017/01/mark_warshawsky.html http://www.econtalk.org/archives/2017/01/mark_warshawsky.htm... Edit: also interesting point Mark Andreesen made: we don't have too much automation, we have too little at least in some sectors. If things keep going as they are now, a TV will cost $10 and health insurance and college $1,000,000.