One Reason for Slow Wage Growth? More Benefits

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.

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