During the peak of the recession, employers were quick to rescind benefits and insurance in order to cut costs wherever possible. As the economy steadily improves, perks and increased wages are key components in attracting qualified workers. However, the move toward offering an array of benefits as opposed to high wages has become a common Trend in Employment.
Rather than commit to a long term offering, employers have been proposing signing bonuses, paid time off, 401k matching, and more. While flexibility and health insurance and high on the list of employee must-haves, employers are still hesitant to provide the most sought after component: wages.
While this might serve the employers, this has the potential to adversely affect the economy. According to The Wall Street Journal, the shift also highlights the fragility of an expansion in which employers remain hesitant to commit to higher wages and are turning instead to more revocable perks that could have broader repercussions if consumers aren’t able to tap bigger paychecks and boost their spending.
What’s more, this mentality has resulted in a consistently staggered wage growth over the last few years. While 3% growth per year is typical, wages have only been increasing by 2% since the end of the recession. The total compensation for employees is now 31 percent benefits, as opposed to only 29 percent ten years ago.
“It’s a structural shift that’s going on. Across the labor market, it’s pretty significant shift of dollars from wages to benefits,” stated Andrew Chamberlain, chief economist and Glassdoor.com
WSJ also cites that since 2001, benefits increased nearly 60 percent, while wages only advanced 40 percent. It is important to note, however, that there are obvious tax implications to higher earners that benefits are not subjected to. Although the tax-free health insurance plans may be revoked during the next presidency, these benefits can be an added bonus for employers in the interim.
For an employer, offering benefits makes perfect sense. Rather than shifting their pay scale and restructure salaries, companies can offer benefits such as a signing bonus which is much quicker and easier, explained Ryan Sutton of Robert Half.
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