No More 10 Minute Breaks: Bonuses Hit a Fresh High This Year. That May Not Be Great News for Workers

The share of workers’ pay going to bonuses hit the highest level on record this year, reflecting a shift in how employers woo job candidates while still trying to keep a lid on base pay.

Private-sector bonuses that aren’t directly tied to a worker’s output reached 2.8% of employer pay and benefit costs in the first quarter. That’s the biggest share since the Labor Department started tracking the figure in 2008.

Bonuses started taking off four years ago. Businesses have been electing to give workers short-term payouts for retention and morale, rather than longer-term wage increases the economy had experienced in previous decades. “When you give wage increases to new workers you have to give it to your current workers, and it’s permanent,” said Lawrence Mischel, labor market economist at the left-leaning Economic Policy Institute.

Another contributing factor: The Trump administration’s late-2017 tax overhaul. The law was meant, in part, to encourage firms to boost worker pay. A few companies, including CVS and BB&T, said they would raise minimum wages and others, like Lowe’s and Chipotle, improved benefits such as parental leave. But others announced plans to give one-time bonuses, rather longer-term pay increases. American Airlines and Citizens Financial Group, for example, awarded $1,000 to many of their workers.

Anecdotally, the trend of bonuses rather than permanent wage increases continues. A recent report by the Federal Reserve showed employers in the Atlanta Fed district were “increasing the proportion of employee compensation that is not permanent and can be withdrawn, if needed.” Meanwhile, a company in the Dallas Federal Reserve district offered large bonuses for trades, such as machinists and welders, who were willing to stay on the job for three years.

The most popular measure of annual wage growth has bounced around 1.5% to 2.5% in recent years, which is below prerecession levels. With a 2.7% gain in May, though, it has finally shown signs of picking up as the labor market tightens.

Still, some chief executives have suggested sweeping worker wage growth seen in the past may be over. “It’s just not going to happen,” Troy Taylor, CEO of Coca-Cola Beverages Florida, said at a Federal Reserve Bank of Dallas conference last month.

Instead, the biggest raises will likely go to higher-skilled workers.

Raises and Bonuses Are About Economics, Not Politics (Jan. 22)

Banks Are Getting a Big Tax Cut. Wells Fargo, Others Plan to Share It With Employees (Dec. 20, 2017)

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