After a brief exchange with Lane Kenworthy a few weeks back, I noticed that EPI had an interesting take on employer-sponsored insurance back in January of 2006:

Despite the fact that 2005 marked the fourth year of an economic expansion characterized by strong productivity growth, the inflation-adjusted wages of most workers’ fell last year. The median (or typical) worker’s wage fell by 1.3% (Figure A). The decline was even greater for those at the very bottom end of the wage scale, who saw their real wages fall by 1.9%. Only those at the very top of the wage scale had wage growth that outpaced inflation.
Some have stated that the reason for this unsettling result is that increasing health care costs are squeezing wage growth. Allan Hubbard, economic advisor to President Bush, stated in an interview with the Wall Street Journal that, “Employers are spending more money on health care, and that’s robbing people of wage increases” (January 12, 2006).
The logic of this claim is that dollars that would have gone into wage increases have instead gone to pay the increased cost of employer-provided health care. According to the view espoused by Hubbard and others, workers’ total compensation—wages plus benefits—continues to increase at a clip commensurate with the strength of the overall economy, even if their paychecks are admittedly not going as far.

I don’t know if “commensurate” is the right word, but so far I think this is a reasonable characterization. EPI continues:

The evidence presented below refutes this claim. First, nearly half (47%) of the workforce do not get health coverage through their job. Second, employers’ health care costs rose more slowly in 2005 than any year since 1999, in part because rising costs have led to less coverage (Gould 2005). Third, not only did wage growth slow last year, but overall compensation growth also slowed and by the third quarter, it too lagged inflation. Finally, the growth of corporate profits in recent years has solidly outpaced that of compensation as employers are trading away wage and benefit increases for higher profits.
About half of all workers don’t even receive employer-provided coverage
According to the U.S. Bureau of Labor Statistics (BLS), 47% of workers did not participate in employer-provided health care benefit plans in 2005 (see Figure B). Thus, there is no health care squeeze that would explain the wage losses of nearly half the workforce. In addition, the BLS data show that among workers whose average wage was less than $15 per hour last year, only 39% participated in employer-provided health plans.1 As shown in Figure A, low-wage workers also lost the most ground in terms of real wages. Thus, those least likely to get health care experienced the greatest loss in real wages, the opposite of what the trade-off explanation would predict.

In March of 2010, Christina Romer and Mark Duggan offered the following:

According to the ECEC data, workers’ inflation-adjusted average total compensation per hour increased by 1.3 percent per year from 2000 to 2009 (from $26.23 per hour to $29.39 per hour in 2009 dollars)1 However, the annual growth rate of average wages and salaries during this period was much lower. More specifically, if one subtracts out the employee share of health insurance premiums2, workers’ average hourly wage and salary compensation increased by just 0.7 percent per year from 2000 to 2009. As shown in the following figure, the corresponding growth rate in ESI premiums (including both the employer and employee share) was much higher at 5.1 percent per year.
As a result of these very different growth rates, the fraction of workers’ total compensation going to employer-sponsored health insurance premiums increased from 7.4 percent in 2000 to 10.3 percent in 2009. If the growth rates in both workers’ average total compensation and in employer-sponsored health insurance premiums remain at their recent rates, this share will increase to 15.0 percent by 2019 and will continue to increase thereafter. Thus in the absence of reform that slows the growth rate of costs, a steadily increasing share of workers’ total compensation will be eaten up by health insurance premiums.

I was particularly struck by the fact that EPI used a different metric to gauge the pervasiveness of ESI:

The increase from 2000 to 2009 in the average share of workers’ total compensation going to ESI premiums is even more striking when one considers that a steadily declining share of workers and their dependents are covered by ESI. More specifically, according to the most recent data from the U.S. Census Bureau, the share of non-elderly adults and children covered by ESI fell from 68 percent in 2000 to 62 percent by 2008. This decline was to a large extent driven by a decline in the fraction of firms offering ESI to their workers, which fell from 69 percent in 2000 to 60 percent in 2009.3 Thus if one focused only on those firms that offered ESI during this period, the trends outlined above would be even more striking.

What accounts for the difference? Many adults and children receive ESI through a spouse or a parent. That is, many workers who did not participate in employer-sponsored coverage offered by their own employer participated in employer-sponsored coverage offered by their spouse’s employer. Might expenditures on dependents influence how compensation is distributed between wages and benefits? If I’m an employer and I’m providing health benefits for you, your husband, and your three children, I’m presumably going to factor that in to your total compensation.

Katherine Baicker and Amitabh Chandra found a fairly significant relationship between rising health insurance premiums and labor market outcomes in 2006:

We estimate that a 10 percent increase in health insurance premiums reduces the aggregate probability of being employed by 1.2 percentage points, reduces hours worked by 2.4 percent, and increases the likelihood that a worker is employed only part-time by 1.9 percentage points. For workers covered by employer provided health insurance, this increase in premiums results in an offsetting decrease in wages of 2.3 percent. Thus, rising health insurance premiums may both increase the ranks of the unemployed and place an increasing burden on workers through decreased wages for those with employer health insurance and decreased hours for those moved from full time jobs with benefits to part time jobs without.

It could be that some of us have been overestimating the role of expensive health benefits in squeezing wages, but I’m not so sure.