Latest / Wages and Prices with Fexingo: Cost of Living, Pay Raises, and Workers' Purchasing Power / Why Your Raise Is Finally Beating the Cost of Health Insurance Premiums
Transcript
- Lucas: So Luna, I’ve got a number that might surprise you. Average hourly earnings for private workers hit thirty-seven dollars and sixty cents in July. That’s up about four percent from a year ago. Luna: Four percent is solid. But we’ve been talking for months about how raises are finally beating specific costs—groceries, rent, even used cars. What’s the new angle today? Lucas: Today it’s health insurance premiums. That’s the one that always felt impossible to outrun, right? For years, the annual premium increases were like a tax on your raise. But the data is showing something different now. Luna: Different how? Because every time I see my pay stub, I swear the premium line goes up more than my gross pay does. Lucas: Well, here’s the thing. The employment cost index for wages—that’s the broadest measure of what employers pay in wages and salaries—was up about four and a half percent year-over-year as of April. Meanwhile, the health insurance component of the CPI, which tracks what consumers actually pay for premiums, has been running closer to three percent lately. Luna: So wages are growing faster than premiums for the first time in like a decade? Lucas: That’s the pattern, yes. And it’s not just one quarter. For most of the post-pandemic period, premiums were climbing at five, six, sometimes seven percent a year. Now they’ve cooled off to something more like three. And wage growth has stayed stubbornly above that. Luna: Okay, so what’s driving the premium slowdown? Is it just overall inflation cooling, or is something specific happening in healthcare? Lucas: A few things. One is that medical care inflation broadly has moderated. The CPI for medical services has been running below two percent recently, which is a big shift from the past. Another is that the labor market is still tight enough that employers are competing for workers, so they’re absorbing more of the premium increase rather than passing it all on to employees. Luna: So employers are eating the cost to keep people. That’s a big deal for your take-home pay. Lucas: Exactly. And it’s showing up in the data. The employment cost index for wages is up, but the benefits component—which includes health insurance—has been rising more slowly. That’s a direct signal that the premium burden on workers is easing. Luna: But wait, is that true for everyone? Because I remember reading that smaller businesses still get hammered by premium hikes. Lucas: You’re right to push on that. The averages hide a lot of variation. Small firms with fewer than fifty employees often face higher premiums and fewer options, so they might not feel this slowdown as much. And people buying insurance on the individual market—that’s a different story entirely. Luna: So if you’re at a big company with a good plan, you’re likely seeing this benefit. But if you’re self-employed or at a small shop, maybe not. Lucas: Right. And that’s why we have to be careful with the national numbers. But for the typical worker at a larger employer, the math is finally working in their favor. Luna: Let’s talk about the recent CPI report then. The July CPI was released this week, and I saw that overall inflation ticked up a bit. How does that play into this? Lucas: The headline CPI was up two point nine percent year-over-year in July, actually a touch higher than June. Core inflation, which strips out food and energy, was up three point one percent. But here’s the nuance: medical care costs were actually down on a monthly basis. So the health insurance relief is showing up right in the CPI. Luna: That’s a good sign. But what about the fact that 10-year breakeven inflation is at two point twenty-seven percent? Does that tell us anything about future premiums? Lucas: It suggests markets expect inflation to settle around two and a quarter percent over the next decade. If that holds, and if healthcare costs stay moderate, then premium growth should stay tame. But there are always wildcards—new drugs, pandemics, policy changes. Luna: So this isn’t a permanent victory, but it’s a real shift from the last twenty years. Lucas: Exactly. For the first time in a long while, your raise is actually beating your health insurance premium increase. And that means more money in your pocket—or at least less of your raise being eaten away. Luna: I want to dig into the wage numbers a bit more. You mentioned average hourly earnings at thirty-seven sixty. But median weekly earnings are at twelve hundred and four dollars, from the latest data. How do those compare? Lucas: Median weekly earnings give us a better sense of what the typical worker takes home. And that number has been growing around four percent as well. So both measures—hourly and weekly—are moving in the same direction: up solidly, above the inflation rate. Luna: So if wages are up four percent and premiums are up three percent, the typical worker is net ahead by about one percentage point on that front. Lucas: That’s a good way to frame it. And when you combine that with the fact that overall inflation is around three percent, you’re seeing real purchasing power gains for the first time in years. Luna: Let’s talk about why this is happening. Is it just the tight labor market, or is there something deeper going on in healthcare? Lucas: I think it’s a mix. On the healthcare side, we’ve seen a slowdown in hospital and physician costs. The pandemic-era spike in demand for certain services has faded. And there’s been more price transparency and competition in some markets. Plus, employers have been pushing back on insurers, demanding lower rate increases. Luna: That’s interesting. So it’s not just employers being nice—it’s them pushing back. Lucas: Right. And workers have more leverage in a tight labor market, so employers are less willing to pass on costs. It’s a virtuous cycle: higher wages, lower premium growth, and more money in workers’ pockets. Luna: But what about the long term? We’ve seen this movie before—healthcare costs tend to outpace inflation eventually. Could this just be a lull? Lucas: It could be. But there are some structural changes that might keep costs lower for a while. For example, more employers are using high-deductible plans, which can slow premium growth. And there’s been a shift toward value-based care, which aims to reduce unnecessary spending. Luna: So there’s reason for cautious optimism. But you’re not popping champagne. Lucas: No, I’m not. Because the averages hide a lot of pain. And if inflation picks up again, premiums could follow. But for now, the data is clear: wage growth is outpacing premium growth, and that’s a big deal for workers. Luna: Speaking of big deals, you know what else has been a big deal? The fact that we get to have these conversations without ads, thanks to our listeners. It’s funny—when we look at the data, we see how much small changes in costs can affect people’s budgets. And that’s why we love doing this show. Lucas: Absolutely. And if you find this kind of analysis useful, you can support the show at buy me a coffee dot com slash fexingo. It’s a simple way to keep us going, and we really appreciate it. Luna: Yeah, it’s like a tip jar for your brain. But no pressure—we’re just glad you’re here. Lucas: So, to wrap up, the key takeaway is that your raise is finally beating your health insurance premium. But that doesn’t mean you should stop paying attention. Track your own premium and wage growth. If your employer is passing on more of the cost, that’s a sign you might need to negotiate. Luna: Good point. And if you’re in a position to switch plans, compare the total cost—premium plus deductible—not just the monthly number. Lucas: Right. Because the data is on your side, but your personal situation might differ. So look at your own numbers, and if your raise is still getting eaten up, maybe it’s time to have a conversation with HR. Luna: And if you’re an employer, listen up: workers are paying attention. Offering better health benefits could be a competitive advantage. Lucas: That’s a great point. And on that note, we’ll leave you with this: the next time you see your premium go up, check your raise. You might be surprised.