by Christina Sandefur
December 31, 2018
With U.S. unemployment
at its lowest in decades, there’s been a fair amount of pessimism
about wage stagnation. If our economy is doing so well, why aren’t people
making more money? One reason for slow wage growth might be that American
workers are receiving a growing share of compensation in the form of benefits
rather than wages.
According
to the New York Times, the average worker receives 32 percent of total
compensation in the form of benefits, such as insurance, retirement plans, and
paid leave. And companies
are getting creative: The fast-food company Chick-fil-A is awarding
millions of dollars in scholarships to its corporate and franchise employees.
Disney will pay full tuition for workers who want to earn a college degree,
finish a high school diploma, or even learn a new skill. Information technology
company Cisco is reimbursing employees for pregnancy-fostering services and
genetic testing. Walmart will pay to assist employees who want to adopt a
child.
Some workers may relish this
change, preferring to exchange wages for higher benefits. Others may prefer
more cash, so that they can spend or save as they wish. It’s all a matter of
individual preference.
But when government replaces
individuals as the decisionmaker, its policies often harm the very people they
were intended to help. For example, paid leave for new mothers can actually
exacerbate gender inequality. As the Cato Institute’s Vanessa
Brown Calder notes, “Being passed over for a job, involuntarily
mommy-tracked, or having wages slashed to pay for prospective benefits can have
impacts that last a professional lifetime.”
The same goes for mandatory
minimum wages, which can put employees out of a job and employers out
of business. They also increase the cost of living by making goods and services
more
expensive for customers. And they can harm
taxpayers by forcing them to bear a greater financial burden or
accept fewer or lower-quality government services for their tax dollars.
Allowing government to
dictate decisions about pay, benefits, and the proper balance of the two will
often produce unintended consequences. But when individuals are left free to
make these choices for themselves, the outcomes are more likely to match their unique
preferences.
For example, while some are
calling for government solutions to the traditional workplace’s so-called
gender pay gap (which
isn’t actually what you think it is), “gig”
economy workers are increasingly female and overwhelmingly believe
they can get equal pay for equal work. Both males and females are able to find
flexibility and opportunities in the sharing economy that wouldn’t otherwise
have been available to them.
Bureaucrats itching to “do
something” about wages and benefits should ditch top-down mandates and instead focus
on eliminating
overreaching occupational licensing laws and making it easier for
people to pursue the job of their choice. Policymakers could also create a
system of personal leave
accounts. Just as people save for retirement and education expenses,
they could save for time that they can’t work, by putting pre-tax wages into accounts
that could be used to pay for their leave time when it’s needed. These solutions
empower individuals to make their own choices and avoid the problematic
one-size-fits-all approach of mandatory government wages and benefit programs.
No one, least of all bureaucrats
in our nation’s or state capitols, knows what is right for each of the millions
of working Americans. Remember: When government mandates a wage increase, jobs
suffer. When government mandates a benefit increase, wages suffer. Shouldn’t workers
be free to choose an employment arrangement that best suits their own needs?
Christina
Sandefur is the Executive Vice President at the Goldwater Institute.
