Labor Compensation
Adjusted for inflation, has the average hourly compensation of private-sector employees risen or fallen since 1986?
Correct Answer
Adjusted for inflation, the average hourly compensation of private-sector employees rose by 31% between 1986 and 2021. During this period, wages/salaries grew by 25%, while benefits grew by 43%. Per the U.S. Department of Labor, "In the final four decades of the 20th century, employee compensation, as measured by employer costs, has undergone dramatic shifts" from cash to benefits, with many of the benefits "legally required" by government. These benefits suppress workers' wages because they cost employers money, which costs employees. Contrary to certain politicians, labor productivity and hourly worker compensation have risen at roughly the same pace for 7 decades. This occurs because employers generally cannot compensate workers much more than their productivity warrants, or employers will lose money and go out of business. Nor can employers compensate workers less than their productivity warrants, or they will lose their workers to other businesses that pay better.
















