Who Pays for Public Employee Health Costs?
We analyze the incidence of public-employee health benefits. Because these benefits are negotiated through the political process, relevant labor market institutions deviate significantly from the competitive, private-sector benchmark. Empirically, we find that roughly 15 percent of the cost of recent benefit growth was passed onto school district employees through reductions in wages and salaries. Strong teachers' unions were associated with relatively strong linkages between benefit growth and growth in total compensation. We further find that when economic conditions are poor, straining public budgets, benefit growth is more readily shifted back to public employees. Our analysis is consistent with the view that the costs of public workers' benefits are difficult to monitor, contributing to benefit oriented, and often under-funded, compensation schemes.
Who Pays for Public Employee Health Costs?, Jeffrey Clemens, David M. Cutler. in State and Local Health Plans for Active and Retired Public Employees, Clark and Newhouse. 2014
Clemens, Jeffrey & Cutler, David M., 2014. "Who pays for public employee health costs?," Journal of Health Economics, Elsevier, vol. 38(C), pages 65-76. citation courtesy of