A New Take on the Funeral Dirge of Wage Growth
All the recent talk about slow, stagnant or minimal wage growth despite record-low unemployment rates has potentially left an important factor out of the equation: benefits. According to the New York Times, it appears that employees are in fact seeing wage growth, but in the form of comprehensive benefits, not dollars in their pockets.
According to the Bureau of Labor Statistics, employer costs for employee compensation averaged $36.22 per hour worked in June 2018. Of this, workers received approximately 32 percent of their wages in benefits alone, an increase from 27 percent in 2000. Of note, these data don’t include non-monetary incentives such as flex time, summer hours, working from home or other similar perks.
Federal Reserve officials have even recognized that employers are increasingly turning to non-wage perks to attract and retain workers. In its September Beige Book findings, officials stated: “Wage growth was mostly characterized as modest or moderate … Some Districts indicated that businesses 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.”
Despite this acknowledgement and that one-third of the average worker’s compensation comprises benefits, the funeral march of wage growth isn’t where it should be for the steady American economy. Binyamin Appelbaum, the Times author, notes that even including these non-wage benefits, “the growth of compensation is very slow by historical standards.”
The White House Council of Economic Advisers argued earlier this month that wage growth is happening, but only when it’s measured “properly.” For example, as we mentioned in an earlier post, after adjusting wages for inflation, the average weekly earnings for Americans grew by a meager 0.1 percent from the last year. But, if you read the 32-page report from the White House, advisers say inflation-adjusted wage-growth is closer to 1 percent (perhaps even 1.4 percent if you consider the “tax cut savings” …).
Michelle Meyer, an economist at Bank of America, told the Times that in today’s economy it does make sense to calculate compensation in broader terms.
“I think it goes back to the idea of whether our old models are as valuable as they once were,” said Meyer. “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.”
Experts seem to agree that employees are increasingly interested in non-monetary benefits (even though higher salaries are often at the top of any worker’s wish list) and employers may more eagerly meet these needs because it’s easier to cut benefits if the economy goes south.
“You can increase benefits, bonus payments and other perks to keep your workers happy without creating a permanent adjustment in how they’re compensated,” said Meyer. “If they go away, it doesn’t give the same perception of a change in their value to the company.”
It appears that this trend in non-wage benefits won’t be going anywhere soon, but is it truly accurate and fair to tell workers that wages are growing because they may (or may not!) have access to summer hours?