Two interesting movements occurred in the most recent Bureau of Labor Statistics’ release of employee compensation in the finance and insurance industries. First is the percentage of total compensation devoted towards wages and salaries and second, average compensation per hour. Which direction would you guess the two are heading? Are wages and salaries eating up a larger take of the pie? What about average compensation, do you think it’s going up or down?
Here’s a look.
Salary and Wages as a Percentage of Total Compensation
First, a look at the salary and wage data as a percentage of total compensation.
Interestingly, the series has a long-term downward bias trend. In early 2004, the percentage of total compensation devoted to salary and wages was 69.4%.
That figure precipitously declined to 64.7% in the second quarter of 2015. Then, it jumped. Salary and wage compensation as a percentage of total compensation increased to an amazing 66.6%.
This jump represents the first increase in a while.
What’s behind the jump?
Well, you can guess what you want. On possible explanation is that firms finally started increasing base salary after years of stagnant wage growth. In other words, bonus checks will show to have been relatively smaller in 2015 because of base salary growth. Another possible explanation is that the denominator started decreasing, i.e. benefits and other non-salary compensation declined.
In any event, an interesting move.
Average Compensation
The next graphic is average compensation.
Fascinatingly, average compensation dropped off, something that hasn’t happened in a while.
Why did average compensation drop off? Perhaps financial firms are starting to hire younger workers to replace older workers? Or, perhaps it’s simply an anomaly?
It’s interesting to note how quickly average compensation rose from 2010 to 2015, yet a very different story is exhibited from 2005 to 2010. Perhaps the run-up is over and the remainder of the economic boom will be akin to the early part of the decade.
How Do the BLS Figures Compare to Job Search Digest’s Survey Results?
The BLS’ figures are estimates based upon company filings and provide only an average, or total view for companies in the financial and insurance industries. Job Search Digest’s data are based upon a survey of private equity and venture capital company representatives and provide lots of interesting detail as it relates to this sector. Here’s a breakdown look at pay by the amount of take-home pay.
Unsurprisingly, bonus pay explodes the higher up the pay scale one goes. In 2015, individuals making $1 million or more of income earned more than half of their income from bonuses, with an average bonus of $600,000 on top of $500,000 in base pay.
As one moves further down the pay scale, bonus pay become quite scarce. At the lowest end – individuals making less than $100,000 per year – bonus pay barely registers.
So, how do the BLS figures align with JSD’s figures?
Well, it appear both figures are pointing to a phenomenon where bonus pay is increasingly concentrated at the top, with base pay becoming an increasingly more important part of the compensation pie for those who earn at the lower end of the spectrum. Interesting.
Conclusion
In looking at the recently released figures on employee compensation in the finance and insurance sectors, two interesting “anomalies” shows up. First, the percentage of total compensation devoted to wages and salaries increased, from 64.7% in the second quarter of 2015 to 66.6% in the third quarter of 2015. Second, average compensation per hour dropped in the third quarter of 2015.
What’s behind the moves is up for speculation. Perhaps the long-awaited retiring of the expensive generation is leading to some cost savings for financial employers? Perhaps some financial employers are opting to not provide health insurance, which would explain the increase in wage and salary costs as a percentage of the total?
Lots of other potential explanations exist; what’s interesting is that it’s happening. We’ll see whether the third quarter turns out to be a blip, or a trend.
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