Benefits - Details Of The Employment Benefit Package

This graphic displays the different components that combine into a standard benefits package for employees. In the display, each component is shown as a percentage of the total package employers funded in the 1986-1999 period. At the top are the legally mandated benefits (e.g. Social Security, Medicare, unemployment taxes). Supplemental pay is at the bottom.

The relationship among the items is reasonably stable. We saw that in the previous panel already. But there has been some shift in the percentage shares of each plan. Three have risen and two have fallen. But changes have been modest.

Expenditures on paid leave fell during the period. In both cases the strong economy was a primary cause. During the tight labor market of the 1990s, employers asked people to work as many hours as possible; time off shrank. New hires were often part time or temporary — categories of employees that are less likely to receive the same benefits as full-time employees. Thus employers spent less on paid leave of all kinds.

The share of retirement plans also shrank. Again, it was the economy. Returns on retirement funds were buoyed up by the strong market, and the amounts employers had to pay to reach predetermined asset balances therefore fell. For plans that required a fixed contribution, higher returns on investment did not alter the employer's cost — but they increased the employees' payout. So, although the expenditure for this benefit category was down, paid-out benefits did not decline.

This brings up an interesting question — Could the opposite also be true? Could one or more of the standard plans have increased in cost and yet be yielding a lower benefit?

Three components of the "package" cost more at the end of the period than at the beginning: legally mandated benefits, health insurance, and supplemental pay. Mandated contributions affect employers' ability and/or willingness to provide other benefits. They're not discretionary. Supplemental pay was up because a tight labor market required more incentives to hold key staff.

The most interesting of the up-trending benefit plans is health insurance. Health insurance shows the most dynamism on our graphic. Could health insurance be a case in which costs are up but benefits are not?

We look at this issue more closely in the next panel.

Sources: U.S. Department of Labor, Bureau of Labor Statistics, Katherine G. Abraham, Commissioner, Employer Costs for Employee Compensation, 1986-99, March 2000, p. 3. Data were converted to constant 2000 dollars using the Bureau of Labor Statistics' Consumer Price Index for urban dwellers (CPI-U), All Items series.