NCPA - National Center for Policy Analysis

Pensions And Health Benefits Decline

January 16, 1997

A smaller share of the workforce is now covered by employer-provided health insurance and pensions than in the recent past. And high-income workers enjoy more benefits than low-income workers. Some trace the reason to government regulations.

  • About four out of every five workers earning over $50,000 have health insurance through their employer, according to the Employee Benefit Research Institute.
  • But only half of workers with incomes between $10,000 and $20,000 do.
  • A similar trend is evident in pensions.

How are the regulations contributing to these inequalities?

  • Rules that often require that firms offer the same benefits to all employees may mean that none will get them.
  • Regulations which stipulate that they will apply only to firms with more than a certain number of workers -- 50, for example -- present firms with an incentive to hire only 49 and make do with temporary workers, if necessary.
  • As the number of health care benefits mandated by law increases, insurance rates to employers increase and discourage them from offering coverage.
  • Then there is the fact that small firms cannot as easily and economically handle all the paperwork and legal fees pension systems require -- so in some cases they avoid offering them.

One study discovered that the cost of providing a defined-benefit pension at a small firm tripled in real terms to $450 a year per employee in 1991. By contrast, it cost just $54 per employee at a large firm -- and even that represents a 180 percent jump from ten years earlier.

Source: Perspective, "The 'Benefit' Gap," Investor's Business Daily, January 16, 1997.


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