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Employer contributions : The steep climb of supplemental wage benefits

Summary:
[embedded content] Employees get paid, and their compensation can be divided into (a) wages and salaries and (b) supplements to wages and salaries. The Bureau of Economic Analysis defines supplements to wages and salaries as “employer contributions for employee pension and insurance funds and employer contributions for government social insurance.” This FRED graph shows the fraction of supplements to wages and salaries in total employee compensation from 1950 to 2017. (Note: A past FRED Blog post also discusses compensation, including non-wage benefits.) We can see a clear trend here: The fraction of these supplements has increased consistently, from less than 8% of total compensation in 1950 to 18% in 1990. Since 1990, though, the series seems fairly stable, hovering between 17% and

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Employees get paid, and their compensation can be divided into (a) wages and salaries and (b) supplements to wages and salaries. The Bureau of Economic Analysis defines supplements to wages and salaries as “employer contributions for employee pension and insurance funds and employer contributions for government social insurance.” This FRED graph shows the fraction of supplements to wages and salaries in total employee compensation from 1950 to 2017. (Note: A past FRED Blog post also discusses compensation, including non-wage benefits.)

We can see a clear trend here: The fraction of these supplements has increased consistently, from less than 8% of total compensation in 1950 to 18% in 1990. Since 1990, though, the series seems fairly stable, hovering between 17% and 20%. The Social Security tax rate exhibits a similar pattern and, thus, may be one of the causes behind this phenomenon. (Specifically, the Social Security tax rate was 1.5% in 1950, was about 5% in the mid-1970s, and has been 6.2% since 1990.)

How this graph was created: Search for and select “Gross Domestic Income: Compensation of Employees Paid: Wages and Salaries.” From the “Edit Graph” panel’s “Modify Frequency” option, choose “Annual.” Next, select the time frame option and change the start date to “1950-01-01.” From the “Edit Graph” panel’s “Customize Data” section, type “Compensation of Employees: Supplements to Wages and Salaries” and select this option to add a second series. In the formula box, enter b/(a+b) and click “Apply” to divide supplemental compensation by total compensation.

Suggested by Makenzie Peake and Guillaume Vandenbroucke.

Want to learn more about employee compensation?

  • Income for the top 1% has risen mainly because of higher executive compensation, esp. in the form of stocks, options, and bonuses.
  • Remember the 2018 teacher strikes in West Virginia, Oklahoma, Kentucky, Arizona, and Colorado? Wages there are lower than average, but so is the cost of living.
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FRED Blog
The Federal Reserve Bank of St. Louis is the center of the Eighth District of the Federal Reserve System. This District includes Arkansas, eastern Missouri, southern Illinois and Indiana, western Kentucky and Tennessee, and northern Mississippi.

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