Mandating benefits- be it culturally or legislatively- is not a free lunch. So begins this EconTalk conversation, in which host Russ Roberts welcomes Mercatus Center economist Mark Warshawsky. In a new working paper, Warshawsky has taken data from the Bureau of Labor Statistics which he asserts shows that income inequality has been rather drastically overstated in the last several decades- IF you take total compensation, not just take-home pay, into account. The culprit, he argues, is the rapidly rising cost of health care, which has outpaced income growth significantly.

What do you think of Warshawsky’s claim? How many non-monetary compensation “perks” do you receive through your employer, and do you value them all the same? When is an employment benefit not a value? If you’re an employer, how do you balance your employees’ productivity with the skyrocketing cost of health insurance?

1. Listening to Warshawsky’s explanation, to what extent do you think we underestimate the well-being of workers relative to 10-20 years ago? What does Warshawsky mean when he claims that true inequality is getting smaller, and to what extent are you convinced?2. Both Roberts and Warshawsky agree that the evidence in this data set seems incontrovertible. What do you think? What other interpretations might be posited, and how do they relate to the means by which we measure economic well-being?

3. It does seem incontrovertible that health care costs are rising. Are the benefits of these health care costs worth it? Explain.

4. What does Warshawsky mean when he says that we should focus our efforts on addressing the causes of inequality, not the symptoms. What would you suggest as a policy prescription to solve this dilemma?