Tuesday, December 18, 2007

Rising Compensation, Little Change in Take-Home Pay 

Filed As:  Health Care

Not only are health care costs threatening to gobble up state and federal budgets, but health care also is consuming more and more of the pay of average workers.

A CBS News poll taken earlier this year found that Americans believe that the middle class is falling behind. But a study by Brookings Institution economist Gary Burtless shows that from 2000 to 2006, the pay for an average worker in the U.S. rose by $3,500 a year after inflation.

What's going on?

Burtless says that only $849 of that $3,500 pay increase went to take-home pay. The biggest share, $1,045, went to fund employee health expenses.

Burtless writes that, "Since we do not see this consumption reflected in our money incomes and because workers seldom know how much their employers are paying for insurance premiums, most of the consumption and income gains arising from health care are invisible to most Americans."

So Americans are getting pay increases, but more than two-thirds of the raise is going to pay for benefits, primarily health coverage. (The rest of the pay increase went to higher contributions to pension and profit-sharing plans.)

One bright note: "Americans across the distribution have derived notable benefits from recent tax cuts. For many middle class families the cuts have made the difference between suffering a loss and experiencing a gain in spendable income," Burtless says.

• posted by Grace-Marie Turner
• 5:00 am
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