Despite historically low levels of unemployment and high demand for labor, salary budget surveys for 2018-2019 suggest that US wages will grow on average by just about 3 percent both this year and next year, continuing a trend of lackluster raises despite labor market conditions that theoretically should push earnings higher. The WorldatWork 2018-2019 Salary Budget Survey projects a mean average wage growth of 3.2 percent and a median 0f 3.0 percent next year, little changed from 3.1 percent (mean) and 3.0 percent (median) in 2018.
Employers are continuing to devote a significant share of their salary budgets to variable pay, WorldatWork found, but these budgets also aren’t growing, SHRM’s Stephen Miller observes:
Some 85 percent of U.S. employers gave out performance-based bonuses or other forms of variable incentive pay in 2018, the survey shows, and the amount of variable pay budgeted and paid out, for all employee categories, has been stable for several years. When total rewards professionals were asked about their variable pay budgets for 2019, their responses were virtually unchanged from the amounts budgeted for this year and … for 2017.
Alison Avalos, director of membership and total rewards strategy at WorldatWork, tells Miller that one reason why these budgets aren’t increasing is that employers are increasingly using benefits to attract and retain talent instead of cash rewards, including intangible benefits like professional development opportunities and purpose-driven organizational cultures that align with employees’ personal values.
Similarly, Willis Towers Watson’s 2018 General Industry Salary Budget Survey finds that US professionals can expect raises of 3.1 percent on average next year, compared to 3.0 percent this year. Wage growth has leveled off at around 3 percent per year over the past decade. Their survey also found that star performers would once again see higher increases next year, and registered a slight increase in budgets for discretionary bonuses:
After the US Congress cut the corporate tax rate from 35 to 21 percent in December, the airplane manufacturer Boeing announced that it would spend $300 million of its tax savings on corporate giving and employee programs, including a $100 million investment in learning and development over the next several years. The company is deciding how to structure that investment based partly on an internal survey, which found that 39 percent of Boeing employees wanted better technical development and 29 percent wanted new skills for jobs affected by new technology.
Now, we’re starting to see how Boeing is spending that money. The company announced several new education initiatives this week, focused on digital skills development and diversifying the company’s talent pipeline, GeekWire’s Alan Boyle reports:
The initiatives include a partnership with Degreed.com to give employees access to online lessons, certification courses and degree programs. Another initiative will put $6 million into a partnership with the Thurgood Marshall College Fund and several historically black colleges and universities. That investment will support scholarships, internships and boot-camp programs to help students experience what it’s like to work at Boeing, the company said.
There’ll also be several new programs to help Boeing employees enhance their technical skills and keep up with industry trends. The focus of the first program will be digital literacy, Boeing said.
The warehouse club retailer Costco announced on Thursday that it was raising starting wages for its US employees by $1 to $14 or $14.50 per hour, effective June 11, while other workers will receive raises of 25 to 50 cents an hour, Seattle Times business writer Benjamin Romano reported:
The raise, to be paid for with part of Costco’s savings from U.S. federal corporate tax cuts that took effect this year, will go to upwards of 130,000 U.S. employees, costing the company about $110 million to $120 million a year before taxes, Costco chief financial officer Richard Galanti said during the company’s fiscal third quarter earnings report Thursday. … Costco competitors including Target and Walmart announced wage increases and bonuses for their employees tied to the tax cuts earlier this year.
“But not everyone at Costco is happy,” Romano notes:
Some salaried employees, including some in the company’s Issaquah corporate headquarters, say they’re being left out of the equation as Costco spreads around the tax benefit. One person, who asked not to be named for fear of retaliation, said after the wage increase announcement, “I would make a considerable amount more going back and gathering carts for the warehouse in the parking lot.”
Raising pay and benefits for entry-level hourly employees has been a growing concern for US retailers and other low-wage employers in recent years as the labor market has tightened, making even low-skill workers more challenging to attract and retain.
In the wake of the Tax Cuts and Jobs Act passed by the US Congress in December, which slashed the corporate tax rate from 35 percent to 21 percent, some large employers announced that they were raising pay, expanding benefits, or (most commonly) issuing one-time bonuses for their employees with the billions of dollars in savings they would gain from the tax reform package. Critics of these tax cut bonuses say they are a cynical attempt to curry favor with the Trump administration and mask the fact that investors are reaping the lion’s share of the rewards. Most of the windfall is being passed on to shareholders through dividends and stock buybacks, as the Wall Street Journal noted in a recent article noting the impact of the tax cuts on corporate earnings in the first quarter.
Some companies are investing their tax cuts in in employees in a different way. The aerospace manufacturer Boeing, for example, announced in December that it was investing $300 million of its tax savings in employee programs, one third of which would go toward learning and development (its total savings from the tax cuts are expected to be around $400 million a year, the Seattle Times reported in January).
In fact, many organizations are putting part of their tax savings toward learning: Our pulse survey on tax reform at CEB, now Gartner, found that among organizations allotting part of their tax savings to HR, 39 percent were investing in employee training, development, and education—the second most common target for these allotments after pay and benefits. (CEB Total Rewards Leadership Council members can see the full results of that survey here.)
McDonald’s announced last week that it was expanding its education benefits program for employees to both increase the value of the benefit and widen the pool of employees who are eligible for it, USA Today reported on Thursday:
Previously, employees had to be on the job for nine months before having a shot at tuition assistance, but that’s been dropped to 90 days. Plus, the weekly shift minimum was 20 hours and now is 15 hours. The changes will make close to 400,000 U.S. employees eligible, the company said. Now, staffers can get as much as $2,500 a year from the Archways to Opportunity program for a trade school, a community college or a four-year university — up from $700. For managers, the figure jumps from $1,050 per year to $3,000.
Some employees’ family members will also now be eligible for assistance. The changes, which McDonald’s attributed to a tight labor market and the savings it accrued from the recent cut in the corporate tax rate, are funded by a $150 million commitment the fast-food giant is making to the program over the coming five years. Since launching in 2015, the company says, Archways to Opportunity has distributed over $21 million in assistance to around 24,000 people.
The program, which is open to employees of both McDonald’s franchises and company-owned restaurants, is offered in partnership with the online education company Cengage Learning. Amanda Eisenberg goes into more detail about how the expanded program will work at Employee Benefit News:
The tax reform bill passed by the US Congress in December, which drastically lowered the corporate tax rate from 35 to 21 percent, has prompted numerous large employers to announce raises, bonuses, or upgrades to their benefits packages as a means of passing on some of their tax savings to their employees. On Wednesday, the restaurant chain Chipotle announced a round of one-time cash bonuses and stock grants, as well as increased parental leave coverage for many employees. On Thursday, CVS said that it would boost hourly employees’ pay from $9 to $11 per hour, among other pay rate increases, and now provide up to four weeks of paid parental leave for full-time employees. Walmart, Starbucks, Disney, Wells Fargo, and other large companies have made similar moves.
What remains unclear, however, is whether these rewards (most of which consist of one-time bonuses rather than permanent wage increases) are sustainable and whether the benefits of the tax cut will redound to the majority of Americans who don’t work for large corporations. Small business owners are reluctant to make similar moves, much as they would like to, until they have a better sense of how much money they will actually save from the tax reform. As the Associated Press’ Joyce Rosenberg pointed out this week, smaller companies have less clarity on that issue than large corporations do, and questions remain as to how new deduction rules will pan out for small business owners. In addition, small and mid-sized businesses have nowhere near the same cash reserves or credit lines as big companies do, which makes the awarding of bonuses and raises a much riskier endeavor.
The major home improvement and appliance retail chain Lowe’s announced in a press release last Thursday that it was introducing a paid parental leave benefit for full-time employees, both salaried and hourly, as well as expanding eligibility for its health insurance plan:
In addition to the company’s comprehensive benefits program, eligible full-time hourly and salaried U.S. employees will qualify to receive:
- Ten weeks of paid maternity leave and two weeks of paid parental leave.
- An adoption assistance benefit to cover up to $5,000 of expenses related to agency, legal and other fees.
- Eligibility to enroll in health benefits sooner, as early as the first of the month following 30 days of service.
Lowe’s also announced one-time cash bonuses of up to $1,000 for its more than 260,000 hourly employees, as some other large US employers have done in response to the substantial cut in the corporate tax rate passed by Congress in December.
The chain’s new leave policy, which goes into effect May 1, means that the 20 largest private employers in the US now offer some form of paid parental leave benefit, the New York Times‘ Claire Cain Miller observes: