Relentless rise in health insurance costs limit job growth

Posted on Sat, Aug. 21, 2004

Health benefits blamed for employment slump

BY EDUARDO PORTER

NEW YORK TIMES


A relentless rise in the cost of employee health insurance has become a significant factor in the employment slump, as the labor market adds only a trickle of new jobs each month despite nearly three years of uninterrupted economic growth.

Government data, industry surveys and interviews with employers big and small indicate that many businesses remain reluctant to hire full-time employees because health insurance, which now costs the nation's employers an average of $3,000 a year for each worker, has become one of the fastest-growing costs for companies. Health premiums are sapping corporate balance sheets even more than the rising cost of energy.

In the second quarter, the cost of health benefits rose at a 12-month rate of 8.1 percent -- more than three times the inflation rate and the rate of increases in wages and salaries.

"Health care is a major reason why employment growth has been so sluggish," said Sung Won Sohn, the chief economist at Wells Fargo.


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Although the economy emerged from recession long ago, posting 11 straight quarters of growth, there are still about a million fewer jobs in the United States than there were at the beginning of 2001, just before the country sank into recession.



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