One Reason for Slow Wage Growth? More Benefits
Image
WASHINGTON
— One of the most perplexing questions about the nation’s economic
recovery is why a tight labor market has not translated into faster wage
growth. Part of the answer appears to be that American workers are
receiving a growing share of compensation in the form of benefits rather
than wages.
The average worker
received 32 percent of total compensation in benefits including bonuses,
paid leave and company contributions to insurance and retirement plans
in the second quarter of 2018. That was up from 27 percent in 2000, federal data show.
The rising cost of health insurance accounts for only about one-third
of the trend. And the data do not include the increased prevalence of
non-monetary benefits like flexible hours or working from home, or perks
like gyms and “summer Fridays.”
Best
Buy, the electronics retailer, began in July to offer four weeks of paid
time off to its employees, including part-time workers, to take care of
family members. The company decided that paid leave was the best way to
show appreciation for its employees, said Jeff Shelman, a company
spokesman. “Our philosophy is that our employees are our most important
asset, and we want to take care of them and allow them to take care of
the people that matter most to them in their lives,” he said.
The
shift toward nonwage compensation has helped to persuade the Federal
Reserve to keep pushing up interest rates. The central bank is expected
to increase its benchmark interest rate on Wednesday for the fourth
consecutive quarter, to a range between 2 and 2.25 percent. Asset prices
already reflect the full increase, leaving only the formality of the
Fed’s announcement, scheduled for 2 p.m.
Advertisement
For
many workers, the returns from one of the longest economic expansions
in American history have been paltry. Wages have grown more slowly than
the economy in the wake of the 2008 crisis, and faster growth in recent
months has been offset by rising inflation. Between August 2017 and
August 2018, the most recent available data, average hourly wages
increased by 2.9 percent, but after adjusting for inflation, the
increase was just 0.2 percent, according to the Labor Department’s flagship survey.
Even including nonwage benefits, the growth of compensation is very slow by historical standards.
Some
economists outside the Fed argue the weakness of wage growth is
evidence that employers are still tapping a plentiful supply of workers.
While the unemployment rate is just 3.9 percent, they note that an
unusually large proportion of American adults are neither working nor
looking for work.
Fed officials have
predicted faster wage growth is on the way. But in the September edition
of its “beige book” survey of economic conditions, the central bank
also noted the turn toward nonwage compensation.
The survey said that companies seeking workers, rather than baiting
their hooks with wage increases, “were increasingly using benefits —
such as vacation time, flexible schedules and bonuses — to attract and
retain workers, as well as putting more resources into training.”
The
Boyd Group, a Canadian auto repair company that operates in the United
States as Gerber Collision & Glass, said it was struggling to hire
enough technicians to meet the demand for repairs. So the company plans
to spend $4.5 million this year to sweeten benefits for its United
States workers, including additional paid vacation and larger
contributions to employees’ 401(k) retirement accounts.
“The
objective is to make ourselves a more attractive employer within the
context of the collision repair industry and, therefore, take advantage
of opportunities to attract people from our competitors,” Brock Bulbuck,
the company’s chief executive, said on a conference call with investors
in May.
The White House Council of Economic Advisers argued this month that
the economic performance, and the benefits for workers, should be
judged by the growth of total compensation rather than wages.
Even
using the White House measure, there is no sign of an acceleration in
compensation since President Trump took office, but Michelle Meyer, an
economist at Bank of America, said it made sense to use broader
measures. “I think it goes back to the idea of whether our old models
are as valuable as they once were,” she said. “The story changes over
time, and I do think the fact that there are other ways of being
compensated means that simply looking at average hourly earnings is not
going to be a comprehensive measure of how the economy is responding to
tightness in the labor market.”
Companies
have kept most of the benefits of economic growth in recent years in
the form of higher profits, so the shift toward benefits appears to be a
rare example of workers getting something they want, albeit a
consolation prize. There is longstanding evidence that workers would
prefer a larger share of compensation in the form of benefits. Unionized
workers, who have greater leverage to negotiate the mix of wages and
benefits, have long used that power to insist on better benefits. The
average unionized worker last year received 40 percent of their
compensation in the form of benefits, compared with just 29 percent for
the average non-unionized worker, the federal data shows.
“Employers
mostly care about the level of compensation, so the composition of it,
they’d generally be glad to do what their workers want them to do,” said
Josh Bivens, the director of research at the liberal Economic Policy
Institute. “When workers actually have an effective voice, the benefit
share tends to be a little higher.”
Employers,
too, may prefer to offer increased compensation in the form of
benefits, because they may find it easier to cut benefits during a
downturn.
“You can increase benefits,
bonus payments and other perks to keep your workers happy without
creating a permanent adjustment in how they’re compensated,” Ms. Meyer
said. “If they go away, it doesn’t give the same perception of a change
in their value to the company.”
The
rise in nonwage benefits is not spread evenly across the work force.
Jared Bernstein, an economist at the Center on Budget and Policy
Priorities, calculated that benefit compensation has increased
15 percent since 2009 for workers in the 90th percentile of the income
distribution, while workers in the 10th percentile are receiving less
such compensation than they did in 2009.
Advertisement
For the median worker, benefit compensation has increased 5 percent.
“When
I talk with blue-collar or service workers, they’re generally pretty
unhappy about wage stagnation and about inadequate benefits,” Mr.
Bernstein said.
The benefit that appears to be in the highest demand is paid time off.
The Society for Human Resource Management, which conducts an annual survey of the benefits offered by more than 3,500 corporations,
reported that the share of participants offering paid maternity leave
increased to 35 percent in 2018 from 26 percent in 2016. It also
reported a significant increase in the share of companies offering paid
leave to fathers, adoptive parents and surrogate parents.
One
recent survey reported that the share of Fortune 1000 companies
offering “summer Fridays” — days on which employees were allowed to
leave early for a long summer weekend — doubled from 21 percent in 2015
to 42 percent in 2018.
The White House
Council of Economic Advisers calculates that increasingly generous paid
leave benefits mean that the average American worker is getting an
additional half-day of paid leave each year, compared with five years
ago.
Large companies are more likely to offer such benefits. In February, Lowe’s became the last company among the nation’s 20 largest employers
to offer paid parental leave to its salaried and full-time hourly
employees. The company now pays for mothers to take 10 weeks of leave,
and for fathers to take two weeks off.
In
surveys, younger workers often place a greater emphasis on benefits,
and some analysts expect the shift toward nonwage compensation to
continue as the millennial generation replaces the baby boomers in the
work force.
Ms. Meyer, the Bank of
America economist, pointed to the tech industry as a harbinger. The
median employer in the tech industry, she said, spends about 2.5 times
as much on paid leave benefits as the median employer across the economy
as a whole.
LLC 501C- 4 UCC 1-308.ALL RIGHTS RESERVED WITHOUT PREJUDICE
Content and Programming Copyright 2014 By Patcnews The Patriot Conservative News Tea Party Network © LLC UCC 1-308.ALL RIGHTS RESERVED WITHOUT PREJUDICE All copyrights reserved By Patcnews The Patriot Conservative News Tea Party Network Copyright 2014 CQ-Roll Call, Inc. All materials herein are protected by United States copyright law and may not be reproduced, distributed, transmitted, displayed, published or broadcast without the prior written permission of CQ-Roll Call. You may not alter or remove any trademark, copyright or other notice from copies of the content. © All Copyrights reserved By Patcnews The Patriot Conservative News Tea Party Network
No comments:
Post a Comment