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Impact of Economic Factors on Workplace Benefits


Patrick T. Leary, M.B.A., LLIF
Corporate Vice President and Director, Workplace Benefits Research

July 2024

Economic indicators measure the health of the U.S. economy, its businesses and consumers. As such, they also provide insights into the health of the workplace benefits market. A strong and healthy business environment gives employers the confidence to invest in their businesses and offer comprehensive benefits packages to attract and retain workers. A strong economy affords employees the willingness and ability to participate in workplace insurance programs, retirement savings plans and other benefits.

While the specter of a recession or economic downturn has loomed for quite some time now, the economy remains strong. Bolstered by a strong second half of the year, real gross domestic product (GDP) increased 2.5 percent in 2023, according to the U.S. Bureau of Economic Analysis (BEA). GDP increased at an annual rate of 1.43 percent in the first quarter of 2024, according to the most recent estimate provided by the BEA. Strong consumer spending continues to lead the way.

One economic indicator that continues to cause concern is inflation. While the increases in the inflation rate have waned, prices remain high across a range of goods and services. According to LIMRA research, cost and affordability were top of mind with workers as they reviewed their benefits in 2023. In an inflationary environment, “wallet share” is an important consideration for providers of insurance, retirement and related workplace benefits.

Another form of inflation and a major contributor to the cost of benefits (for both employers and employees) is the cost of health insurance. An employee’s share of rising health insurance premiums limits their ability to participate in other workplace benefits, such as retirement savings plans, wellness programs and voluntary benefits. According to the Kaiser Family Foundation, the average annual premium for employer-sponsored health insurance coverage increased 6.6 percent in 2023 for single coverage and 6.7 percent for family coverage. On average, covered workers contribute 17 percent of the premium for single coverage and 29 percent of the premium for family coverage. Since 2019, health insurance costs are up 17.3 percent, and 16.5 percent for single and family coverage, respectively.

Labor Markets

By the end of 2022, the labor market overall had recaptured the job losses experienced during the pandemic and continued its momentum, posting strong growth across most industry sectors in 2023. Through June 2024, the monthly jobs reports published by the Bureau of Labor Statistics continued to show solid gains. However, the unemployment rate has slowly increased from 3.4 percent in January 2023 to 4.1 percent in June 2024, and June’s report may signal likely interest rate cuts by the Federal Reserve before the end of the year.

Wage-based benefits such as life and disability insurance are highly impacted by employment, wage and salary levels. During 2023, the rate of inflation declined to levels below that of wage growth; by mid-year, wage growth was outpacing that of inflation. As is the case with employment growth, wage growth, which has been strong, is also expected to moderate and revert to long-term growth trends as employment slows and falling inflation restrains wage increases.

Over the past several years, new dynamics were introduced to the labor markets, the employment landscape and the world of work. The pandemic accelerated many trends already underway with regard to remote work and digital transformation. The Great Resignation created worker shortages, particularly in service-related jobs, as workers stepped back and re-evaluated the meaning of work in their lives and the relationships they desired with their employers. Technology and the breakthroughs of artificial intelligence (AI) are rapidly transforming work and jobs themselves.

Other trends point to encouraging signs for the labor market and opportunities for organizations that sell workplace benefits.

  • The labor force participation rate is increasing, particularly among prime-age workers (25-54). The prime-age labor force participation rate increased from 79.9 percent in April of 2020 to 83.6 percent by May 2024, returning to levels not seen since prior to the pandemic.
  • Women’s employment has seen broad improvement. Female workers were disproportionately impacted by the pandemic, taking on childcare and family caregiving more so than their male counterparts. Among women, the labor force participation rate bottomed at 54.6 percent in April 2020. By May of 2024, it had rebounded to 57.6 percent.
  • After experiencing a drop during the pandemic, the percentage of foreign-born workers continued its long-term upward trend. By May of 2024, there were 30.9 million foreign-born workers in the labor force. Foreign-born workers and workers of different ethnic and cultural backgrounds have different, and in some cases, unique needs with regard to insurance and related protection products.
  • The freelance and gig economy continues to grow (Figure 1). According to research conducted by LIMRA and EY, approximately one-third of the workforce participates in the gig economy to at least some extent, with the highest participation among younger workers. In five years, up to 29 percent of the workforce may rely on gig work as their primary source of income. The expansion of the gig workforce is a potential growth opportunity for insurers and benefits providers that can develop innovative strategies to supply benefits to these workers, either directly or indirectly.

Figure 1. Worker Participation in the Gig Economy

Filter the data in this chart by clicking on a color bar in the chart legend.


Economic indicators and the business cycle have a direct impact on the market and opportunities for organizations providing workplace benefits. Broader social and demographic trends also drive change. While the world of work continues its transformational shift, one thing remains certain: workplace benefits remain central to employers’ value propositions in the competition for talent.

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