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How Will Employer Health Insurance Affect Wages and Social Security?

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  • Anqi Chen
  • Alicia H. Munnell
  • Diana Horvath

Abstract

When the employer cost for employer-sponsored health insurance (ESHI) rises, it slows wage growth and erodes Social Security’s tax base. Both these effects were evident from 1996-2005, but the situation stabilized during 2005-2019. Why did the ESHI-to-compensation ratio stabilize? During both periods, the major driver was the general rise in national health costs. From 2005-2019, this impact was largely offset by less ESHI participation by lower earners and less demand for family plans. Going forward, rising health costs could again push up the ESHI-to-compensation ratio, unless the factors that have been offsetting this growth continue.

Suggested Citation

  • Anqi Chen & Alicia H. Munnell & Diana Horvath, 2024. "How Will Employer Health Insurance Affect Wages and Social Security?," Issues in Brief ib2024-08, Center for Retirement Research.
    • Handle: RePEc:crr:issbrf:ib2024-08
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