(Bloomberg) – If the rich get richer, one way is they have better insurance, heftier 401(k) plans, and a sturdier all-around benefits package. And the trend is making America's already wide income gap even worse.
Employers spend a median of 38 cents of each compensation dollar on benefits, according to an analysis by the Pew Charitable Trusts Foundation released on Thursday. But as compensation goes up, so do benefits. For every additional dollar of average hourly pay an employee gets, Pew finds, employers spend an additional 67 cents on benefits.
"The data show that in industries where more is spent on benefits generally, employers spend more both in dollars and as a proportion of pay," the report reads. "This is because establishments in high-spending industries offer many types of benefits and spend generously on them."
Workers with smaller paychecks, who can't afford to pay out of pocket for things like extra health care expenses and child care, get less support from their employers to meet those very needs. In the meantime, better-paid people don't have to dip into their bank accounts for such expenses, and can instead use their salaries to get even richer by investing the money or buying a house or putting it away for retirement. A better-paid person can put more money in a 401(k), a deal that's even sweeter if the employer matches contributions.
"Benefits do impact families' financial security," said Sarah Sattelmeyer, an officer at Pew. In a survey Pew commissioned in 2014, most respondents said they would rather have better health insurance and retirement benefits than a pay raise, if they had to choose between the two. A big chunk of employees' salaries get eaten up by growing health care costs, for example, which have been shifted onto employees. They want to put that money toward retirement, a growing concern.
Most benefits spending goes to legally required programs, like disability insurance and Social Security. (And even those favor the rich: Someone with a larger paycheck gets a bigger social security pay out.) The gap comes, in part, from the variety of perks offered higher-paid workers. In addition to generous parental leave, high-paid workers may have access to egg-freezing subsidies, breast-milk shipping services, and a variety of other benefits, while low-paid workers tend to get the bare minimum. "Industries, particularly those associated with low pay and inconsistent work hours, offer fewer types of benefits and spend less on the ones they do provide," the Pew report says.
Of course, people who make more money, pay more in taxes -- in theory. But, many benefits come in the form of non taxable income. As benefits make up a bigger chunk of compensation, this further advantages those in a higher tax bracket.
In highly competitive, well-paying fields, we've seen a benefits arms race, with companies offering unprecedented parental leave policies and student loan repayment programs to attract and retain the best workers. In part-time, low-wage fields, like retail and food services, employees don't get much at all. "There totally is a gap," Scott Dobroski, career trends analyst at Glassdoor, told Bloomberg.
Now we have a better sense of how big that gap is. And it has a compounding effect on financial stability.
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