CBO: Employers Overcame Health Costs During 2001-2003 Recovery

By Allison Bell

August 05, 2005 at 08:00 PM

Share & Print

U.S. employers may have held down wages from 2001 to 2003 to compensate for the increases in health coverage costs that took place during that period.[@@]

David Brauer, an economist at the Congressional Budget Office, presents that thought in a paper on U.S. employment during the 2001-2003 recovery.

The CBO, a congressional think tank, prepared the paper to analyze why employment continued to fall during the recovery period following the 2001 recession.

In most cases, Brauer writes, health coverage expenditures are the same for any permanent, full-time employee who works enough hours to qualify for coverage.

Because the health coverage costs for each permanent, full-time worker are, essentially, fixed, "any increases in those costs will induce some employers seeking to boost output to extend the hours of their current workforce rather than to hire additional workers," Brauer writes.

But average weekly hours have not risen sharply, suggesting that employers have not been reacting to rising health coverage costs by asking employees to work longer hours, Brauer writes.

Government survey results show that the average cost of labor per level of output actually fell during the 2001 recession and the early stages of the recovery, and Brauer sees that as a sign that employers offset rising health premiums by reducing the rate of growth in wages and other benefits.

The CBO has posted a copy of the Brauer paper on the Web at //www.cbo.gov/ftpdocs/65xx/doc6599/08-05-Jobs.pdf

NOT FOR REPRINT