Why You Should Make the Case for Raising Over Bonus
Companies such as Apple, American Airlines, and Home Depot are generating positive headlines about giving some employees one-time bonuses, which they credit as a tax cut recently passed by Congress (the corporate rate was cut from 35 percent to 21 percent). The problem with this, as reported by the New York Times, is that bonuses replace the actual boost.
This trend started in the 1990s, but did spread during a recession from which we have not yet fully recovered, according to the Times .
In 1991, for example, spending on temporary benefits and bonuses for employees, known as variable wages, averaged 3.1 percent of total compensation budgets, while wage increases were 5 percent.
In 2017, one-time payments accounted for 12.7% of these budgets; the growth was only 2.9 percent.
Why do they do it? Because the bonuses are cheaper. The premiums are annuities: employers pay more every year, and these increases get worse over time. Bonuses are cheaper, easier to hand out, and the effect is instant. They create exactly the type of goodwill that companies want after the negative press about massive tax cuts. “The recessionary hangover has prompted employers to avoid increasing fixed costs and to be as flexible as possible in recruiting and compensation,” Patricia Cohen wrote in the Times. “The trend towards outsourcing work that was once done internally as a way to save money fits into this storyline.”
It is important to note that the increase in premiums did not help the stagnation of wages.
“The inflation-adjusted average income of male full-time workers was lower in 2016 than in 1973,” Cohen writes. “And theirlifetime earnings, which include salary, wages, bonuses and exercised stock options, have largely declined since then.”
Bonuses aren’t the only reason salaries haven’t gone up, Cohen notes. There are a number of factors, including the decline in trade unions, globalization and the minimum wage, which was higher in 1968 (in inflation-adjusted dollars) than it is today.
Some companies, such as AT&T and Walmart (which owns Sam’s Club), give out bonuses to selected employees, while others are fired.
If your company pays out a bonus but doesn’t raise it, you obviously won’t give it up. But there are other steps you can take:
- Make a case for a raise (this is a bandage and does not solve the structural problems associated with wage stagnation, but this is something you should consider).
- Join and / or form a union within your company that can close the deal for you . “Among full-time wage earners, union members had an average weekly earnings in 2017 of $ 1,041 and non-union workers had an average weekly earnings of $ 829,” according to theBureau of Labor Statistics .
So while there is nothing wrong with the bonus, in an “either-or” situation, it is better for workers to add.