Bonuses are up one cent in 2018 since the GOP tax cuts passed

Lawrence Mishel

Lawrence Mishel Distinguished Fellow, EPI

Data from the Bureau of Labor Statistics’ Employer Costs for Employee Compensation gives us a chance to look at workers’ bonuses in 2017 and 2018, to gauge the impact of the GOP’s Tax Cuts and Jobs Act of 2017. Last year, our analysis showed that bonuses rose by $0.02 between December 2017 and September 2018 (all calculations in this analysis are inflation-adjusted). The new data show that bonuses actually fell $0.22 between December 2017 and December 2018 and the average bonus for 2018 was just $0.01 higher than in 2017.

This is not what the tax cutters promised, or bragged about soon after the tax bill passed. They claimed that their bill would raise the wages of rank-and-file workers, with congressional Republicans and members of the Trump administration promising raises of many thousands of dollars within ten years. The Trump administration’s chair of the Council of Economic Advisers argued last April that we were already seeing the positive wage impact of the tax cuts:

A flurry of corporate announcements provide further evidence of tax reform’s positive impact on wages. As of April 8, nearly 500 American employers have announced bonuses or pay increases, affecting more than 5.5 million American workers.

Following the bill’s passage, a number of corporations made conveniently-timed announcements that their workers would be getting raises or bonuses (some of which were in the works well before the tax cuts passed). But as EPIanalysis has shown there are many reasons to be skeptical of the claim that the TCJA, particularly its corporate tax cuts, will produce significant wage gains.

The new data for December 2018 allows us to examine nonproduction bonuses in every quarter of 2018 to assess the trends in bonuses in absolute dollars and as a share of compensation relative to both December 2017 and 2017 as a whole. The bottom line is that there has been very little increase in private sector compensation or W-2 wages since the end of 2017. W-2 wages actually fell 2.0 percent from December 2017 to December 2018, and total compensation fell by 0.9 percent. W-2 wages and compensation in 2018 were imperceptibly higher, growing, respectively, by 0.2 and 0.1 percent.

The $0.22 per hour decline in bonuses between December 2017 and December 2018 is startling and may be a statistical fluke. Nonproduction bonuses as a share of total compensation grew from 2.7 percent in December 2017 to 2.1 percent in December 2018. As prior analyses have noted, whatever growth in bonuses has taken place is not necessarily attributable to the tax cuts but could be related to employer efforts to recruit workers in a continued low unemployment environment. As a June 2018 Wall Street Journal article noted:

Bonuses started taking off four years ago. Businesses have been electing to give workers short-term payouts for retention and morale, rather than longer-term wage increases the economy had experienced in previous decades. Anecdotally, the trend of bonuses rather than permanent wage increases continues. A recent report by the Federal Reserve showed employers in the Atlanta Fed district were “increasing the proportion of employee compensation that is not permanent and can be withdrawn, if needed.”

No explanation comes to mind for a sharp decline in bonuses.

The figure below shows the share of total compensation represented by nonproduction bonuses for private sector workers since 2008.

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Reposted from EPI

A Moral Imperative

A Moral Imperative

Union Matters

Fighting to Fix the New NAFTA

From the AFL-CIO

For the better part of a generation, our global trading system has been rigged to enrich corporations at the expense of working people—and no deal has done more damage than NAFTA. We are hungry for a North American trade deal that lifts wages and improves livelihoods. The new NAFTA, also known as the United States–Mexico–Canada Agreement (USMCA), as proposed falls short, and that’s why America’s working families will keep fighting to fix it.

Here are three reasons why the labor movement opposes the new NAFTA:

  1. There is nothing in the current deal to fix the outsourcing of good-paying American jobs to Mexico and other low-wage countries. 851,000 U.S. jobs were lost already due to NAFTA.
  2. Unless Mexico finishes and implements full labor reform and stronger rules and enforcements are added to the NAFTA text, Mexico’s workers will continue to face wages as low as $2 per hour or less and receive no protection from threats and violence when trying to unionize.
  3. Monopoly rights for Big Pharma would keep drug prices sky high, and new rules would undermine protections such as workplace safety.
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