US Wages May Finally Rise, Through Biotechnology
The Futurist
For the last few years, despite robust GDP and productivity growth and job creation, the average income of the US workforce has been rising at a very slow rate. Some of this was attributed to 'outsourcing', but this is not the case, as job creation would also have been weak, rather than just wage growth.
The reason for low wage growth has been rapidly rising healthcare costs. Some of this is due to an aging population, and some of this is due to the growing number of illegal immigrants not paying into a system they are using. The chart below from the Bureau of Labor Statistics shows how the increased costs to employers of their employees is consumed by benefits (most health insurance), with little going to salaries. This is in sharp constrast to the late 1990s, when employers could pass more of the costs directly towards employee salaries.
In fact, the perception that the economy is weaker now relative to the late 1990s, despite GDP, productivity, and unemployment rates being comparable, could be entirely due to this. People are getting weaker raises even when employers have increased spending on employees each year.
But we may be over the hump, as some good news is emerging. Michael Mandel's blog has observed a decline in some of the technology-related components of healthcare costs. The costs of medical labs and imaging centers stopped rising altogether in the last year. Mandel says this may be due to competition, but I think this is due to technology. Exponentially improving technologies are pervasively moving into medicine to deliver faster, cheaper, more effective treatments.
If the moderation in the price of high-tech medical costs continues, US wages may rise as employers can pass more on towards salaries instead of health insurance premiums. |
