Wages and Perks

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Megan McArdle writes,

Both the supply curves and the demand curves for labor have been undergoing substantial transformations that may simply have shifted the economy to a new equilibrium. Which is an economic jargonish way of saying this may be the new normal.

The new normal is slow wage growth.

I think that one should watch what is happening to non-wage benefits. Anecdotally, I keep hearing more stories about very generous family leave policies. With things like health care benefits and (401) K matching policies, firms have a lot of ways adjusting compensation that do not involve wages. Many of these are difficult for government statisticians to track.

10 thoughts on “Wages and Perks”

  3. ‘ They can be wooed back in with sufficiently high wages. And the fact that they’re out there, and could work, may be depressing wages, because as soon as wages pick up a bit, more workers show up to compete for those jobs.”

    Nonsense. If people can only be wooed into the workforce by higher wages, the cannot be holding wages down. You have to have implausible elasticity estimates (where a tiny increase pulls in a huge amount of non workers) for this to be a real thing in the US economy.

  4. I think that one should watch what is happening to non-wage benefits. Anecdotally, I keep hearing more stories about very generous family leave policies.

    Ha, Ha, Ha….That is maybe for the top 10% or so. And these are the people when working do 70 hours. Nobody else.

    And non-wage, especially health coverage amounts, took a HUGE decrease in 2006 – 2010 so we way under estimated the lower wages in the Great Recession. Additionally I have not seen these go up or down either way since 2011.

    Another way of thinking about the modern economy is we are mirroring the 1950s if you roll back the tape.

    1) Job growth is slow mostly due to supply issues. (Look up the jobs created in the 1950s sometime.)
    2) Companies are starting to have to hire deeper and train more. (We hiring people that would have been looked at…Maybe back in 1997.) I believe this was true in the 1950s where companies were more following ‘Branch Rickey’ talent building. They hired a lot of men after High School & 2 years in the army to fill their jobs and hoped they stay for extended periods.

    • I laugh that libertarian economist never complain that sticky wages going up is the problem of the economy.

  5. The data to look at would be the growth in the wages/salaries being *paid* (not advertised) for the same position over some time period- for *new* hires. I’ve seen some data recently (no link) that shows a decent bump in pay for people who switch jobs. But, you’ve got to switch. Perhaps there is a lot of risk aversion on the part of employees afraid to switch jobs and that’s a major part of holding down compensation growth.

    • Or perhaps there is a limited number of situations where companies are willing to increase pay to recruit somebody.

  6. Whenever people say, “Sure wages haven’t changed, but the value of the benefits have gotten much more valuable — isn’t that great?,” it sounds like a fancy way of saying, “Medical care has gotten much more expensive — isn’t that great?”

    In other words, total comp has only gone up if you reprice the value of their health insurance according to today’s prices. This makes sense with a lot of goods, but I don’t think it does in the non-market of medicine.

    And I don’t hear anyone arguing that health care is much better than it was 10 years either.

    • True, but as our libertarian friends always remind us, people’s lives are much better today because of all the free access to internet porn and video games.

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