Tax Cuts Provide Limited Boost to Workers' Wages
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A new survey of 152 companies by executive-recruitment firm Korn Ferry International revealed 14% were putting part of their tax-cut savings into base salary increases. A poll of 1,500 companies by consulting firm Mercer LLC showed 4% are redirecting tax savings to budgets for bigger paychecks in the coming year. And in a survey of more than 1,000 companies published by human-resources consulting firm Aon PLC, 99% said the tax cuts weren’t prompting them to increase minimum wages. Companies are reluctant to grant higher-than-usual pay raises in part because it adds to their fixed labor costs, compensation experts said.
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Just Capital, a nonprofit that evaluates business behavior, has been tracking 119 companies in the Russell 1000 index that have announced spending plans for their tax-cut-related savings. The nonprofit calculates that the companies it is tracking will save a combined $59.3 billion from the tax overhaul. Of that amount, 7%, or $4.2 billion, appears to be destined for workers in the form of bonuses, benefits, wage increases, training or retirement contributions. The rest is being used for things like share buybacks, philanthropy and job creation.
Companies’ reluctance to funnel more tax-related savings toward lasting salary increases is one reason why U.S. workers have seen little real wage growth this year, despite the strong economy, according to economists and compensation specialists. With a 3.9% unemployment rate, U.S. employers are grappling with one of the tightest labor markets in decades. Labor Department data show private-sector hourly wages rose 2.9% in August compared with a year earlier, but the consumer-goods prices have risen at nearly the same rate, eating most of those gains.
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Despite the flurry of high-profile bonus announcements following the tax-code overhaul, the survey found such lump-sum payments weren’t ubiquitous. Less than 10% of the companies said they planned to dole out one-time bonuses over the next year, or had already done so, because of the tax cuts.
https://www.wsj.com/articles/tax-cuts-provide-limited-boost-to-workers-wages-1538472600 (paid subscription)