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Slow Wage Growth: Income Inequality or a Shift Toward Benefits?

It’s no secret that wages for millions of Americans have been stagnant, or growing slowly at best. Some economists see it as a continuation of a decades-long widening in income equality due to changes in the global economy, innovation brought on by technology, or even the decline of unionized labor. So reports The Wall Street Journal.

However, what has accompanied the return to a more robust job market in the past few years is higher compensation in the form of benefits or perks. To some extent, this is attributed to the rise of the Millennial generation. This young, fastest-growing segment of the workforce has made clear its preference for better work/life balance and quality of life; paid time off; greater workplace flexibility, and good health insurance.

At the same time, the tendency of companies to reward their employees with a sign-on bonus or an extra week’s vacation reflects employers’ fears that the slowest recovery from recession in decades may be tenuous; and they feel more comfortable offering more “revocable” perks as opposed to a higher salary.

In addition to more generous health-insurance plans (which may go the way of hefty raises thanks to the imposition of the Affordable Care Act’s so-called “Cadillac tax” on higher-end plans in 2018), companies are starting to offer non-taxable benefits like health-club memberships, free cell phones and dog-friendly offices.

Indeed, while wages have shown pokey growth of about 2% per year (12% overall) since the recession officially ended six years ago, benefits have grown by 15% over the same period. The trend may throw a bucket of cold water on the “widening income gap” theory, to some extent.

Still, if the economy continues to expand, it may become harder for bosses to favor perks over raises.

Read the full article from The Wall Street Journal.

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