In lieu of higher wages, com­pa­nies turn to perks

The Charlotte Observer (Sunday) - - Business - BY BINYAMIN APPELBAUM New York Times

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 U.S. 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 onethird of the trend. And the data does not in­clude the in­creased preva­lence of non­mon­e­tary 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.

For many work­ers, the re­turns from one of the long­est eco­nomic ex­pan­sions in U.S. 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.

But 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 bench mark in­ter­est rate 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.

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.”

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 long-stand­ing 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 nonunion­ized 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,” 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.

For the me­dian worker, ben­e­fit com­pen­sa­tion has in­creased 5 per­cent.

“When I talk with bluecol­lar or ser­vice work­ers, they’re gen­er­ally pretty un­happy about wage stag­na­tion and about in­ad­e­quate ben­e­fits,” 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.

THERE IS LONG-STAND­ING EV­I­DENCE THAT WORK­ERS WOULD PRE­FER A LARGER SHARE OF COM­PEN­SA­TION IN THE FORM OF BEN­E­FITS. UNION­IZED WORK­ERS HAVE LONG USED THEIR LEVER­AGE TO IN­SIST ON BET­TER BEN­E­FITS.

GERRY BROOME AP

An em­ployee ad­justs a tele­vi­sion dis­play at a Best Buy in Cary, N.C. Best Buy be­gan in July to of­fer four weeks of paid time off to its em­ploy­ees 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.

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