The U.S. labor market continues to tighten. For example, the number of unemployed Americans per job opening is near a record low, and the ratio of quits to layoffs and discharges is well above pre-recession levels. The former suggests that job seekers are facing less competition for vacant positions, and the latter hints at workers’ increased willingness to give up their current job security for better employment opportunities. At the same time, initial claims for unemployment benefits have not exceeded 300,000 for more than 230 weeks in a row, one of the longest streaks on record and a clear sign of employers’ reluctance to let go of talent.
Small businesses are especially aware of the tight conditions in the labor market, as evidenced by the historically high percentage of owners surveyed by the NFIB who regularly cite “quality of labor” as the most important problem facing their company at the moment. Moreover, a majority of owner respondents each month continue to complain about there being “few or no” qualified applicants for the positions they are trying to fill. Altogether, the above figures are why many economists expect the recent uptick in wage growth to continue to accelerate in the second half of this year. On top of higher incomes, though, many Americans may also see their employers respond to the tightening labor market by boosting workers’ healthcare and retirement benefits.
Indeed, two-thirds of employers in an earlier Willis Towers Watson survey said that they are “planning or considering making changes to their benefit programs or have already taken action.” Roughly a third of organizations said that these changes will include expanding personal financial planning for workers, and more than a quarter reported plans to increase 401(k) matching contributions. Numerous companies over the past year followed through on such promises and boosted their 401(k) match, with several citing the Tax Cuts and Jobs Act of 2017 as a key reason for doing so. However, most of these firms were likely already planning to enhance their benefits offerings due to the tightening labor market but were simply able to move up their timetable thanks to tax reform.
Regardless, the big takeaway for workers should be that employers recognize the importance of these benefits. In fact, nearly two-thirds of finance executives surveyed by CFO Research and Prudential said that they believe employee satisfaction with benefits is important for their company’s success. Sixty-five percent of respondents also said that they feel employee benefits are critical to attracting and retaining employees, and 82 percent believe that their companies gain from having workforces that are financially secure. A majority of surveyed executives even said that if the deductibility of employer-sponsored benefits were to be removed their companies would either continue to offer the same package or increase employee compensation to counterbalance.
Sources: U.S. DoL, NFIB, Willis Towers Watson, NAPA, Prudential