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.