Dennis Cauchon, USA TODAY
A USA TODAY analysis found that benefits climbed $1,302 per full-time worker from 2007 to 2011, or 10.8%, after adjusting for inflation.
Employers are boosting benefits faster than wages, handing out stingy pay raises but making up for it by paying more for health insurance and other benefits, a USA TODAY analysis finds.
Employer-paid benefits accounted for a record 19.7% of worker compensation last year, according to Bureau of Economic Analysis' personal income data. That's up from 16.6% in 2000 and less than 10% in the 1960s.
The shift to paying workers in benefits - rather than cash - has accelerated in the past decade, especially since the economic downturn hit in 2007. Employers slammed the brakes on wage hikes while protecting popular benefits such as medical insurance, government data show.
USA TODAY found that benefits climbed $1,302 per full-time worker from 2007 to 2011, or 10.8%, after adjusting for inflation, according to BEA data. Wages grew just $777 over those four years, a 1.4% increase.
"People feel like their paycheck isn't going up, yet employers complain that their costs are going up. They are both right," says economist Kevin Hallock, director of the Institute for Compensation Studies at Cornell University.
Taxes are one reason for the shift. Wages are heavily taxed, for both employees and employers, while benefits are not.
Workers prize good benefits but often don't understand their financial cost, Hallock says. A pay raise is easily visible. A benefit increase is not - and may even feel like a pay cut. When health premiums go up $100 a month, the worker may pay $25 more and suffer a drop in take-home pay. The $75-a-month benefit increase is invisible.
In January, the value of medical benefits will start appearing on annual W-2 tax forms, a change required by the health care reform act. The amount is for information only and isn't taxable.
More employers are explain to tell workers the value of their benefits. State Farm provides the information on an internal website and in annual e-mails to employees. The University of Michigan puts the school's contribution to medical insurance costs on pay stubs.
About half of Fortune 500 companies now tell employees something about the cost of their benefits, says Towers Watson health care consultant Chris Keys. The goal is to recruit and keep good employees by showing them all of their compensation, he says.
Since 2000, wages have risen at a 0.8% annual rate above inflation while benefits climbed 2.8% annually. That's a reversal from the 1990s. In that prosperous decade, wages rose 1.8% annually above inflation while benefits grew 1.1% a year.
Bottom line. In 2011, average compensation was $67,744 per full-time worker - $54,413 in wages and $13,331 in benefits, BEA data show. Benefits have grown at 2.5 times the rate of wages in the past decade.
Biggest benefits. The three largest benefits are roughly equal in size: health insurance, retirement benefits and employer contributions to Social Security and Medicare.
Public workers. Benefits have risen 4.1% annually for government workers during the past decade vs. a 1.9% annual rate for private-sector employees.
Pollack, author of the new book Pay: Why People Earn What They Earn and What You Can Do to Make More, says employees should consider total rewards, including benefits and promotion opportunities, to judge compensation. "There's a lot more to pay than wages," he says.