I remember the first time I received my paycheck in the United States six years ago; I could hardly believe my eyes: Is this a mistake? How could my promised annual salary be reduced by a quarter when averaged monthly? Later, the head of the HR department sat down with me and calculated it line by line: federal tax, state tax, social security, health insurance… After all these deductions, indeed about a quarter of my salary was gone.
The paycheck is a living example of how American society operates. Unfortunately, I wish to maintain some personal privacy; although I have wanted to discuss this issue for years, I still hesitate to share my own paycheck. Recently, however, I had the opportunity. The president of a small company published an article in The Wall Street Journal, revealing one of his employee's paychecks. He did this mainly to complain about how burdensome taxes are and to argue why the unemployment rate of 9.5% in the United States is unlikely to decrease quickly. However, by revealing this, he also disclosed the responsibilities that companies bear for their employees.
The employee whose paycheck was revealed is named Sally. To protect her privacy, a pseudonym was used. She has worked for 15 years at a sound equipment company in New Jersey with 83 employees, has a high school diploma, and has received several vocational trainings, earning an annual salary of $59,000. This salary is not only considered average in this company but also represents a typical working income in the United States.
An annual salary of $59,000 means an actual income of $44,000, as $15,000 is deducted from the paycheck. This includes $2,376 for health and dental insurance, $126 for state unemployment insurance, $149 for disability insurance, and $856 for medical coverage. The New Jersey state government takes $1,892 in state taxes, while the federal government takes $6,250 in social security and other taxes.
Sally receives $15,000 less from her annual salary, while the company pays an additional $15,000 for her $59,000 salary. In other words, the actual cost to the company for employing her is $74,000. Sally pays $2,376 for her health insurance, but that is not enough; the majority is covered by the company, which pays $9,561. Additionally, the company must pay for her life insurance, which costs $153. The federal government requires the company to pay $56 for unemployment insurance, $149 for disability insurance, $300 for liability insurance, $856 for medical coverage, and $3,661 for social security, while the state takes $505 for unemployment insurance. In total, the company pays $74,000, while the employee receives $44,000 in actual income and $12,000 in benefits (mainly health insurance). The portion taken by the government accounts for 33%.
The issue that the president did not discuss is: with so much money deducted from Sally's paycheck, what does she actually receive? The largest portion is health insurance. With health insurance, not only does she benefit, but her entire family incurs minimal medical expenses. Whether for outpatient visits, specialists, or hospitalization, she generally pays a $15 copay for outpatient services. Prescription costs are also a small percentage, and the total payment is usually capped. Moreover, she can choose any specialist or renowned doctor for treatment. In the case of major surgery, she pays nothing. This kind of "one person benefits, all rise" insurance naturally incurs high costs. Before the passage of the Affordable Care Act, only about 16% of the population in the United States lacked health insurance.
Social security is another significant expense. Both the company and the employee must contribute. This is essentially your retirement fund. Unemployment insurance is another item that is shared by both the company and the employee. If you become unemployed, you can receive half of your salary for six months, providing a breathing space, and in times of not-so-bad economic conditions, you can find a job within six months. Of course, if you suffer a work-related injury or death, you or your family will receive substantial compensation.
Indeed, taxes in the United States are heavy. However, this burden provides you with almost comprehensive insurance. Your other expenses are reduced. Americans do not like to save, mainly because there are not so many worries. Of course, the company where Sally works is small, and the benefits are not great. In slightly better places, there are various other benefits. For example, there may be some subsidies for children attending college, etc.
China needs to move out of a low-wage economy; simply raising salaries is not enough. What Chinese workers need more is practical social security.
(The author is a well-known scholar living in the United States)
