What’s In a Wage?

Today the Bureau of Labor Statistics released its quarterly report (June 2014) on the cost of employee compensation.  The average hourly wage for U.S. workers in the private sector was $21.02.  Broken down:

  • The average hourly wage for private sector full-time workers in all industries was $24.04.  For part-time workers it was $12.37.
  • The average hourly wage for Information Services (the industry with the highest wages) was $32.59.  For Hospitality and Leisure (which also includes food service) it was $10.32.

Thus, there are significant wage gaps between full and part-time workers, and highly-skilled and less-skilled workers.  Special interest groups representing food service and retail employees are calling for a “living” wage that is higher than the $10.32 average.  But for those who deem it worthy to block traffic to demand higher wages, or strum guitars and sing about the evils of the top ome percent, it’s necessary to put things into perspective.  The BLS report also notes:

  • In addition to the hourly wage, the average hourly cost of benefits paid by employers is an additional $9.09 an hour.  These benefits include legally required benefits, such as Social Security and Medicare taxes, unemployment insurance and workers’ compensation.
  • Also included are benefits that attract employees in the first place, such as health insurance, paid vacation and sick leave, long-term and short-term disability insurance, contributions to employee retirement accounts.

Of course, this is an average.  Not all employers provide the same optional benefits, and the cost of benefits varies by industry and an employee’s salary.  Obviously, workers’ compensation will cost more in the construction industry than it does in the IT industry, and disability insurance will cost more for highly paid employees than for lower paid employees.  For IT, the average hourly cost of benefits is $19.09, compared to $2.84 for Leisure and Hospitality.  Differences are also influenced by part-time versus full-time workers, size of firm and so on.

But the point to be made is that the benefits that workers so desire cost money, about one-third of the cost of employment.  The more costly benefits become, the more they whittle away at significant wage increases.  When government mandates benefits such as Obamacare on top of already mandated benefits, it costs you – the worker – in terms of take home pay.  Don’t want the benefits, you say?  Too bad, you get them anyway.  There is very little wiggle room for selecting what you do and don’t want to pay for.  Otherwise, you may be bringing home 20 to 30 percent more than you do now.

And by the way, for the state and local government workers who complain they do not get enough pay and benefits (yes, I’m talking about you, American Federation of State, County and Municipal Employees), the time to stop squawking is now.  The BLS report found that state and local employees receive an average hourly wage of $27.58, plus $15.49 in benefits! Not too shabby if you ask me.







Comments (3)

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  1. Santiago says:

    And the huge over-arching argument attached to wages is also prices! Purchasing power! Whether or not companies will cut prices when our wages fall is a subject of contention, but whether or not they will raise them when our wages rise is not quite as questionable.

  2. Vera says:

    Do government employees get a better rate since they are such a large group? That is, the number your quote for benefits, is that for how much they paid for the benefits or how much they are worth?

    • Pam says:

      That is how much the benefits cost the employer (taxpayer) The value of them, particularly health insurance, would be much greater.

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