The Impact of Labor Market Trends on Health and Pension Benefit Coverage and Inequality

This study examines labor market trends related to the receipt of health and pension benefits as compensation by private sector workers over the 19-year period from 1979 to 1998. This focus on trends in benefit coverage as compensation is important, among other reasons, because employerpaid benefits continue to be the primary source of both health insurance and of private retirement savings for the vast majority of Americans under 65 years of age. As policy makers continue to consider targeted and incremental solutions to the problem of millions of Americans without health insurance or adequate retirement savings, a fuller understanding of how labor market trends are affecting work-based coverage and inequality -- and anticipating future trends in coverage -- will be useful for developing meaningful policy options and proposals for reform.

The study divides into two main sections. The first uses household survey data from the Current Population Surveys between 1979 and 1999 to investigate labor market trends in employer-provided health and pension coverage in the private sector over the past two decades. In order to focus on trends affecting benefits paid as compensation, we define coverage as benefits received from a worker’s own employer and therefore ignore health and pension coverage from other sources, as well as offers of coverage that are not taken up. The primary analytical question addressed is how much of the decline in private work-based health and pension coverage after 1979 can be attributed to structural shifts in employment (i.e., shifts in the U.S. job mix by industry or occupation) and how much is due to broader-based changes in the rate of coverage within detailed industries. A final part of the first section projects rates of health and pension coverage in 2008 using employment projections data from the BLS Office of Employment Projections.

The second half of the study examines trends in the self-reported rate of health and pension coverage by earnings quintile and decile using data from the CPS at five points over the 1979 to 1998 period. The trend is then decomposed by major occupation and industry group to identify significant differences by income group. Because the dollar value of coverage varies greatly across firms and over time, unpublished hourly compensation data from the BLS are used to measure changes in actual employer expenditures for health and pension benefits relative to wages levels by industry and broad occupational "collar."

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