American wages are higher than British by more than you think
We think we’re all pretty much aware that US wages are higher than UK by and large and in general? To which a fairly usual response is “But free health care!” and therefore Nanunanu or some such. Well, yes, except the way we usually measure wages means that US incomes are even higher, when we consider health care costs, than we think.
This is not an earthshaking point, it’s just one of those little grubby nuts and bolts issues we so delight in around here.
To use comparable figures, for the US: “ Median weekly earnings of the nation's 122.1 million full-time wage and salary workers were $1,118 in the third quarter of 2023” and UK: “Median weekly earnings for full-time employees was £682 in April 2023,” (OK, there’s 6 months of inflation to account for in there but….). Or, on an annual basis, the US is $58,136, the UK £35,464. The FX rate is £1: $1.26. Or perhaps PPP at $1: £0.68. (ie, $1.47). By PPP rates the Americans are still gaining substantially more than Brits.
The US is a richer society, thus wages are higher. The US economy is lower tax, less regulated, than the British. We’ve not found anything here that violates long held prejudices therefore.
The standard response to this is that but, but health care! Americans have to pay for theirs, we Brits get it free from the NHS. Which, at this level of wage measurement, is to get that the wrong way around. For what we are measuring here is wages, not compensation. Compensation is what you get from going to work, not merely wages.
In Britain we gain those wages then have taxes taken off them. Some part of those taxes then pay for the NHS which is then free at the point of use. But UK wages are therefore the £34k minus the cost of health care. USians, on the other hand, gain their wages plus health care. For, for the significant majority of full time employees, health care insurance is something they gain from their employer. And which is not included in this measure of cash wages. It’s part of compensation, not wages.
No, we are not advocating a move to employer paid health care. Of all the varied ways health care can be done we do not think that’s one of the ways it should. We are also not suggesting that doctors should be paid as much here as there and so on. We might just note that for those who do have that health insurance they do actually get to see a doctor in less than geological time and so on but still, the point here is not about health care, it’s about wages.
Yes, who pays health care makes a difference when we compare UK and US wages. But we’ve got to get this the right way around. The standard measures of wages for the UK are before health care costs. In the US they’re after. US wages, when accounting for health care, are even higher than the standard comparison states that is.
Again, UK wages are before the tax to pay for health care. US wages are after employer paid health insurance. US wages are significantly higher than UK when we account for health care costs.