Many of us have long been struggling with helping employees understand the confluence of benefits and compensation. Straight wages are the most obvious form of compensation, but those of us that get to experience the exciting employer side of things also realize the cost, and value, of benefits as health care, insurance, and other costs rise. Some employers completely shield employees from those rising costs, in which case the employees are oblivious to their "total compensation" while most share or pass on the increases.
Both a former employer as well as my current company have tried to educate employees as to the value of their total benefits package by creating personalized annual statements, usually with a nice fat bar graph showing how benefits are worth 30-50% above straight wages. Unfortunately the message doesn’t seem to get across, which explains the popular perception of "stagnant wages." Our friend Steve Conover over at The Skeptical Optimist has a couple of posts on the subject. In the first he takes on the stagnant wage myth itself.
Here’s how the BLS describes their compensation data: "The Employer Costs for Employee Compensation product is a quarterly survey that shows the employers’ average hourly cost for total compensation and its components." I charted the BLS numbers, and calculated the change in real compensation for the six years from Q4 1999 to Q4 2005. A pleasant surprise: real compensation per hour has been the opposite of "stagnant"; in fact, it grew by 6.7% in the 2000-2005 interval. That’s better growth than any six-year period in the last twenty years, including 1995-2000.
He then goes on a bit of a well-deserved rant on how the presidential candidates, especially from one side, are blathering about the myth and the moderators and press aren’t calling them on it. However he really gets interesting in a follow-on post asking Do Employee Benefits Benefit Employees? What the heck kind of question is that, you ask? Let’s let Steve describe his quandary.
In the three days since I posted the article below this one, I’ve had to revise my opinion about employee benefits. Specifically, I’ve had to revise downward my estimate of the number of people who actually consider them beneficial to employees.
Benefits apparently aren’t benefits to those whose political talking points get more difficult if employee benefits are assumed to benefit employees. If the cost of health insurance increases, and a company pays part or all of the increase, guess what: that doesn’t "benefit" the employee; sure, it cushioned the blow, or even eliminated it, but somehow that’s not good enough to be classified a "benefit." (Makes one wonder how many employers realize that any extra money they’d pay out for health insurance cost increases would not be considered of "benefit" to their employees.)
Whatever. In my judgment, employee benefits benefit employees, just as money wages do. Compensation (pretax) is the sum of the two, and real compensation (pretax) has increased significantly since the business-cycle-peak year of 2000. And, because everyone’s income tax rates went down since 2000, the after-tax effects would have to be even larger; too bad the BLS doesn’t publish after-tax numbers.
I’ve been called an "idiot" for that thought process.
I guess that forces me to join the idiot club as well. As a final note, I’ve always been intrigued with how some benefits are critically valuable for some and not others and how some benefits become attached to employee compensation and others don’t. Employers don’t provide car insurance, so why are they should they provide health insurance? Sure, healthy employees make for good employees, so there is a business interest. But in supporting that business interest do we add far greater unnecessary complexity with regards to health care portability? Similarly many employers are experimenting with "opt-out" forms of 401k enrollment to help "encourage" employees to save for retirement, but we run into a wall with young kids more interested in where the weekend’s beer money will come from than in what they’ll be living off of in fifty years.