High-Wage Workers’ Wages Not Outpacing Low-Wage Workers

The academic literature on inequity is brimming with anecdotes on how the wages of the poor are stagnant while wage growth is primarily clustered around high-wage workers. But these studies tend to count only cash “take-home” pay. Writing in the National Bureau of Economic Research, researchers found was that (non-cash) health benefits substitute for (cash) take-home pay. When total income is considered, the poor and middle-class wages have not been stagnating, as many suggest.

  • Between 1995 and 2008, the lowest 10 percentile of workers (aged 25-61) wages only rose 1.93%. But when total compensation is included, the increase was 12.28%.
  • During the same period, the highest 10 percentile of workers (aged 25-61) wages rose 10.48%. But when total compensation is included, the increase was 11.67%.

Although total wage growth was similar for the highest and lowest workers, more of that wage growth was in the form of health benefits for the lowest-wage workers.

Comments (4)

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  1. Devon Herrick says:

    I’ve always believed that if workers (especially moderate-income workers) really understood how much their employer-sponsored health plan reduces their take home pay, they’d demand control of the funds and have an HSA.

    But because the government provides health care to the old and the poor; and employers are erroneously assumed to provide free coverage for the employed, workers somehow imagine health care is free.

    Many people did not oppose ObamaCare because it perpetuates the illusion that we can all have top-notch medical care at no cost to ourselves. But it’s not true.

  2. Larry C. says:

    Devon: Thanks for this post. I hear this nonsense all the time. Glad to have it cleared up.

  3. Joe S. says:

    Good post. Counters a lot of misleading rhetoric from anticapitalist mentalities.

  4. Virginia says:

    Annual inflation for this period was about 2.6%. Factoring in inflation means that both low-income and high-income earners lost purchasing power. (Did the study correct for this?)

    And high-income workers lost more than low-income workers.

    Furthermore, considering that most high-income earners in this age bracket (indeed the vast majority of all high-income earners) got a college degree in order to make that much money, are we seeing the value of a college education eroding?