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Benefits and Bonuses Aren't Making Up for Slow Wage Growth

11/10/2018

Summary

Amidst a recovering economy and record-high profits, paychecks are still slow to increase and the theory is that instead of raising wages, companies are giving out bonuses and adding benefits instead. But other economists believe that the additional bonuses are only a result of recent tax cuts, resulting in considerable controversy amongst economists. 

Key Points

  • Some economists believe that companies are replacing wage growth with bonuses or benefits
  • Yet, retirement and insurance benefits as a share of workers' compensation has remained flat between 2014 and 2018
  • Other economists believe that the bonuses aren’t a substitute for wages, but are simply a result of tax cuts

Discussion Questions

  1. How might economists measure whether wage growth is be replaced by increased bonuses or benefits?
  2. How might the biases of "left-leaning" economists or "conservative" advocacy groups affect their analysis of the data?
  3. How would receiving bonuses in place of increased wages affect the long-term well-being of workers?
  4. Why might managers choose to dedicate increased profits to bonuses or benefits, rather than wages?

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