Are Benefits the New Wages?

Are Benefits the New Wages?

Most compensation experts expect wages to rise this year, albeit not dramatically. WorldatWork‘s Kerry Chou predicts “another year of continued modest gains” but not “the break-out year workers are hoping for.” On the global scale, a Korn Ferry/Hay Group forecast in December projected real wage increases of 2.5 percent, the highest in three years, though part of that gain is attributed to low inflation. Writing at the Huffington Post in anticipation of Friday’s December jobs report, Glassdoor’s chief economist Dr. Andrew Chamberlain spotlights one potential reason for the lackadaisical pace of American wage growth in recent years, which is that employers are rewarding their workers with more benefits and less cold cash:

During the past decade, benefits–what economists call “non-wage compensation”–have dramatically outpaced wage growth. This includes monetarily measurable benefits like health insurance, paid vacation, free meals and more. In the 43 quarters since 2005, average U.S. benefits grew faster than wages in all but three quarters, all of which occurred during the tumultuous times of late 2008 and 2009. … Whatever is behind America’s big shift from wages to benefits, it’s been around for more than a decade. … [W]hile this trend has accelerated since the end of the Great Recession in 2010, it reflects a longer-term structural shift rather than an ephemeral quirk of the latest business cycle.

On the other hand, in an article posted at Forbes on Monday, Elaine Pofeldt observed that employers are now having a harder time luring top talent with competitive health benefits, partly due to the upward pressure the Affordable Care Act has put on the cost of employer-provided insurance. Health insurance alone currently accounts for over 7 percent of private employers’ total compensation costs, according to the Bureau of Labor Statistics, so it will be interesting to see whether benefits continue to outgrow wages as employers’ biggest benefit liability gets more and more expensive.