NCPA - National Center for Policy Analysis

Companies Cut Back on Workers' Benefits

November 18, 2002

As companies struggle to maintain or increase profits in today's challenging economic environment, a great many firms are reducing employee benefits. Many of the benefits being cut were introduced in the booming 1990s to attract scarce workers.

For the first time in four years, more workers saw their health insurance benefits reduced than increased.

  • Some 17 percent of employees worked for a company that reduced health care benefits in 2002 -- compared with 7 percent in 2000, according to a survey by the Henry J. Kaiser Family Foundation and the Health Research and Education Trust.
  • Health premiums jumped 12.7 percent this year -- the largest increase in 12 years.
  • Meanwhile, pay raises -- which are averaging less than 4 percent -- haven't been this paltry in nearly a decade.
  • Employers' overall budget for pay raises will drop to a projected 3.8 percent in 2003 from 4.4 percent in 2001.

The number of companies offering mental health coverage has dropped to 76 percent this year from 84 percent in 1998. Nine percent of large firms with 200 or more workers eliminated retiree health benefits for new hires or existing employees in the last two years.

The proportion of employers offering paid maternity leave declined from 44 percent in 1998 to 17 percent this year and paid paternity leave is also down.

Some major companies are also scaling back their matching contributions to 401(k) retirement plans.

Source: Stephanie Armour, "Companies Chisel Away at Workers' Benefits," USA Today, November 18, 2002.

For text


Browse more articles on Health Issues