Rising Healthcare Costs And Wealth Inequality

Mark Warshawsky and Andrew Biggs wrote an opinion piece in the Wall Street Journal pointing to rising healthcare costs as one of the sources of the wealth gap in the United States.

According to the authors of the article, “Health costs are a bigger share of total compensation for lower-wage workers, and so rising health costs hit their salaries the most. The result is higher income inequality.” Employers make up the costs of paying employees more for their health benefits by not increasing their salary by as much.

For higher-income workers, a larger proportion of their total compensation is made up of their salary instead of health benefits. As a result, salaries for higher-income workers have increased by 35%, while for lower-income workers they have only increased by 28%. If “employer premiums [had not] risen, average salaries today would be around $7,800 higher.”

Warshawsky and Biggs believe, “Reducing the tax preference for health care over other forms of compensation could lower health costs directly, as well as providing incentives to shift from “first-dollar coverage” of all health outlays to true insurance against large and unforeseen health costs.”

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