Income Stagnation

It’s a common complaint: incomes haven’t improved much on an inflation adjusted basis for the past several decades. The numbers are proof. Yet, at the same time, the amount that employers spend per employee has moved relentlessly upwards. How can this be?

A lot of employers’ labor costs are only partially visible to employees. Health care insurance is a pretty big ticket item and has been getting a lot more costly. There are other costs that have crept in: mandatory family leave, increasing costs of workman’s compensation, accommodations for the disabled, accommodations for military deployment – it goes on and on. None of these things are necessarily bad, but none of them are free.

The bottom line is that labor has been receiving fringe benefits at the expense of direct wages. Some would argue that this is good, others would argue that it is bad, but no one should argue about income stagnation without accounting for fringe benefits.

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