Friday, April 28, 2017

Wages Up, Healthcare Costs Down?

As the economy has fairly-steadily improved since the global financial crisis in 2009 and as the stock market has risen nicely since then, worker-pay has remained stubbornly unchanged.  However, the latest data is much more optimistic.

The Employment Cost Index has just posted its best quarterly performance since 2007!  Undoubtedly, this reflects the tight labor market . . . finally . . . and probably explains the recent rise in Consumer Confidence.  Maybe, the weak retail sector will see some improving sales.  They need it!

One small but interesting data-point is that wages in the private sector rose 0.9% in the first quarter, compared to 0.6% in government.  It is unusual for the private sector to grow 50% faster than the public sector.  We can expect public unions to become more strident soon.

Another small but interesting data-point is that salaries are rising faster than benefits.  At first, it was assumed that employers realized that benefits can become unbearable during a recession and are fighting hard to control legacy costs.  Closer examination shows that healthcare costs are rising much more slowly than the overall rise in benefit costs.  In other words, non-healthcare benefit costs are rising faster than healthcare costs.  Does this tell us anything about Obamacare?