Labor Market Review
As companies struggle to keep existing qualified workers as well as attract and hire new workers, the task of keeping labor costs minimized becomes an increasing challenge. Rather than paying higher wages, some employers are compensating their employees with enriched benefits.
The Department of Labor monitors not only how much companies pay their employees, but the breakdown of how companies are compensating their employees. The most recent data released shows that companies are spending more on health insurance, retirement savings, bonuses, vacation time, and other group benefits rather than increasing wages. The recent gain in benefits grew by nearly 12% for bonuses and benefits.
Boosting benefits rather than compensation allows employers more flexibility in making adjustments should a business become less profitable or economic sentiment falter. It’s tougher to take away a pay raise versus a benefit.
Some employers need to negotiate with unions in order to modify workers’ wages, either for higher or lower compensation. As profits have grown for many companies nationwide, the ability to offer bonuses and additional benefits has risen, since bonuses are closely linked to corporate profits.
With unemployment near 18-year lows, the 3.9% unemployment rate has led to numerous job openings that exceed the number of jobless seeking work. This tightening has led to employers using bonuses and benefits to maintain and recruit skilled employees.
This past month, the White House Council of Economic Advisers reported that 623 U.S. companies announced bonuses, pay increases, and better benefits as a result of the tax law changes.
Sources: Labor Department; September 18, 2018 Release,USDL-18-1499, White House Council of Economic Advisers