Apparently South Dakota isn’t the only state where employers and policymakers are capable of ignoring the obvious. Employers nationwide are responding to 3.9% unemployment by trying to recruit and retain workers with everything but big pay raises. Consider the example of Florida window-tinting franchiser Charles J. Bonfiglio:
CORNISH: What is he doing to try to recruit and retain workers for this window-tinting business?
ARNOLD: Well, he’s doing some things you might expect. Although health care, 401K plans – those actually aren’t the kind of things we would normally see for window-tinting businesses. He’s doing that. And in his corporate office, he’s doing all kinds of stuff.
BONFIGLIO: I mean, we have car-wash day once a month. We have – we just had – today we had massage day where we had a masseuse come in here and massage each of the employees for, you know, a half an hour to an hour. We have ice cream day. You know, so we do different things to make it fun in the office and the culture [Chris Arnold, “Despite U.S. Economy Improvement Wages Remain Low,” NPR: All Things Considered, 2018.08.03].
What makes employers think that workers would rather have ice cream and rubdowns than a bigger paycheck? When we talk tax policy, my conservative interlocutors occasionally argue that we must keep taxes low because individuals can spend their money more wisely than the government; couldn’t we apply the same argument about superior agency to paychecks? Isn’t it more efficient to put more money in workers’ paychecks and let labor decide how they want to spend their money rather than having Big Brother management decide their leisure opportunities for them?
I worked in an office once where an incentive for meeting some arbitrary lead-conversion goal was a weekend ski trip with lots of booze. I’m much more inclined to spend my weekend with my family or on my bike than in a ski lodge with the co-workers (not all of whose company I enjoy) with whom I’ve already spent 40 hours of my week. Even if I had gone, I wouldn’t have touched the booze; I thus would have declined a big chunk of the “value” the boss was offering. The boss’s incentive would only partially satisfy part of his workforce.
Pay raises and cash bonuses don’t work that way. If the boss offers a dollar an hour raise, I can’t imagine any worker saying, “Sorry, that extra $160 a month will get in the way of my family time.” If the boss offers a $500 bonus, no worker will say, “I can use $250, but I don’t like bigger sums, so keep the other half.”
By offering ice cream and massages to his workers instead of pay, Bonfiglio pushing his workers back into to the barter system. He’d never let customers pay for his window-tinting services with chickens or garden cucumbers; his business, like the entire economy, depends on payments in cash, the most efficient means of transferring wealth and allowing participants in the marketplace to get what they want when they want it.
Besides, doesn’t an employer introduce even more inefficiency into the marketplace by turning his workspace into an ice cream and massage parlor? Shouldn’t all work resources be dedicated to getting work done? Isn’t it more efficient to let workers choose their own leisure resources and use those resources outside of work?
Bonfiglio is apparently part of a much broader trend of employers doing everything but raising wages to recruit and retain workers. The Trump economy (if we can call it that) hasn’t changed the stagnancy or decline of real wage growth. Economists haven’t figured out the complete explanation…
CORNISH: But there have got to be some theories, right, Chris? What are people saying?
ARNOLD: There are. The short version is the decline of unions might be playing a role or other ways that employees just don’t have the power that they used to to negotiate better pay. Productivity growth is slow. It’s kind of jargony, but that’s another reason. And workers might be getting compensation like we heard about – health care, bonuses, gym memberships and other stuff like that [Arnold, 2018.08.03].
As long as management and the Republican Party keep restricting workers’ ability to work together for better wages, and as long as a couple buckets of ice cream and a hired masseuse are cheaper than adding cash to paychecks, workers may be stuck with employers making leisure choices for them.
Hey Cory, when your school starts giving out car-washes, massage day and has an ice cream day for you let me know. . .
I will make clear to any employer that I prefer to be paid in cash and allowed to make my own decisions about how to spend what I earn. As a Senator for District 3, I would support legislation ensuring that public employees get the best pay we can manage and that we don’t get bogged down in lots of inefficient perks packages.
I would note that “ice cream day” also poses tax complications. Wouldn’t a free massage count as a thing of value that should be reported on the 1040 and taxed accordingly? If I get a free 30-minute massage every month, if that service is usually worth $30, then over a year I’m getting a value of $30. If the IRS taxes that, I have to pay from the rest of my depressed paycheck. If the IRS is going to tax me on that $360, I’d rather have $360 cash from which to pay that tax.
“I will make clear to any employer that I prefer to be paid in cash” after all, it’s all about the money isn’t it?
As for your second question: yes, you are correct. I am actually surprised school districts that let their teachers and students use school computers for personal use are not required to report it to the IRS as compensation. My bet is they are but it is being ignored. . .
Cory,
Doesn’t $$30 a month come out to $360 per year? Did you mean a week?
More to the point, I’m not much of a “joiner” so the perks that the majority people would consider inducements have never appealed to me. Time to read the stack of books I have accumulated is more valuable than a ski trip, gym membership, or massage.
I know I’m committing sociology without a license but I do wonder if all of these perks are a sign that a job is no longer just a job but that employers are trying to make the workplace replace other social institutions like churches or civic clubs/service organizations.
I always maintained that I don’t live to go to the job; I go the job to live. The examples you cite here seem indicate that employers are trying to make the job central to employees’ existence a until the company downsizes due to tech advances. Then employees are left with no job and fewer financial resources than they would have had if they had been given money rather than massages.
The point of the perks is probably two-fold: 1) to give perceived value above monetary cost (to the employer) and 2) to be temporary (treats require no long-term commitments). Why not just pay in lottery tickets and MAYBE pay someone a million dollars?
This is all still remnants of the Milton Friedman philosophy that the ONLY concern for a corporation is toe ensure profit for the shareholders. Any and all other stakeholders and considerations are secondary: social/community implications, worker/employee implications, environmental implications all take a backseat to ensuring the investors get paid. Even beyond the investor held business, that paradigm permeates all business and business thinking in America.
There was a time (when America was great) that this singular worship of profit was not the absolute dictate of business/corporate action.
Back when, perks were an added inducement. Then they became in lieu of higher pay and then they became in lieu of in lieu.
With wingnuts running the show, wages and perks are both on the endangered species list and soon to be erased from history.
Ice cream and rub downs aren’t perks. Perks are what we union workers put our paychecks on hold and walk picket lines for.
[paid holidays – paid sick leave – severance and unemployment benefits and paid parental leave]
USA workers and farmers work for left-overs and seem to only want some distant autocratic billionaire to tell them they’re winning and beating back socialism.
Well, when European Democratic Socialist workers are rated against American Capitalist workers on those four vital perks the Europeans score from 7.0 – 7.3. Americans score .03.
Also, the DemSocial Europeans, even when paying higher taxes upfront, have more spending money left over at the end of the month.
~ (DemSocial is defined as paying a fee or tax to buy as a group. Think Sam’s Club, Co-Op and COSTCO)
https://www.fastcompany.com/3056830/how-the-us-employee-benefits-compare-to-europe
Hi Cory,
I think there’s a couple points you’re missing. First, giving an employee straight cash isn’t always the best bang for the buck. Thanks to our income tax regulations, if I gave my employee $1000 in a Health Savings Account, they could spend every penny of it. If I gave them $1000 in wages, they have to pay a couple hundred to Uncle Sam.
Second, a company representing a lot of employees can get a better deal than someone on their own for things like health insurance.
Third, employers are trying to build loyalty. Yes, back in the 60s companies ostensibly cared more for their employees… but the employees were also much more likely to stay at the company for their whole career. They had each other’s backs. Today, adults have many more career/company changes and that’s costly to the company… everything they invested to train, build, and connect the employee is gone. Money spent on wages keeps some employees loyal… but it’s not a sure thing. The big tech companies (Google, Facebook) found that making the work environment crazy posh and fun was a bigger loyalty motivator than salary. They say that millennials are more attracted to an environment where they feel impactful and respected than earning big wages.
Kind regards,
David
“Perks are what we union workers put our paychecks on” Ha, ha, ha!!!! You are sitting in South Dakota!!!! “Your” union has no power in South Dakota. I’m not even anti-union. I think unions have a role and function but unions in South Dakota have no power. Even in the schools where the majority of teachers are union they have no strength at all. Sorry man, I wish you could edit your post. That was embarrassing.
OS … Your anti-American behavior (as well as your English) is awfully suspicious, whomever you are. I believe, just like Maria Butina, Justice has eyes on you.
OldTroll Trollop adds so much to the conversation. Russia bought and paid for.
I’ve had the masseuse thing with two of my jobs. Either hired for an appreciation day or a parent volunteered their services. Both were nice gestures. However, once it’s over and they make their pitch for further services, I’m left knowing it’s something I can’t afford…
David, I think those tech companies also pay quite good salaries to retain those workers.
I agree with Porter about the use of the term “perk.” The largest that you left off your list is a pension plan. In the later part of your post you discuss loyalty; one benefit really went to the heart of retention and loyalty: the pension – that was a real reason to stay with a company. Then business (selfishly) floated the idea of worker mobility needing pensions to be “portable.” Before you know it, we now have a system of few-to-no private pension plans, IRA’s that are a fraction of the old-school pension plans, and an American workforce with not nearly enough savings to prepare for a realistic retirement. Again, all because holding money in savings for the betterment of a workforce (and society) became less valuable than putting dividends in the pockets of investors. Friedman’s sociopathic profit focus at work again.
Yes, Kal Lis—my math error! I originally calculated weekly massages, then changed my wording to monthly without changing my subsequent calculation. I regret the error and have edited the comment.
Hi o,
I agree that the tech employees at Facebook and Google are probably adequately compensated (no clue about the janitors, etc.). However, whatever compensation is at those companies, it could be higher if they had a more utilitarian office environment… which is the trade-off Cory is discussing here. They could cash out all the perks, reduce their elaborate campuses to Soviet-style barracks, and double employee pay. (Pre-tax.) Would employees be more loyal in that environment? My guess is no…
To your point about pensions, 401(k)s were actually created at the request of Kodak employees in the late 70s. Again, employees didn’t want to be beholden to their employer by a pension system that necessitated staying with their boss for better or worse. They wanted the liberty to work elsewhere and still be able to retire.
And finally, with respect to getting massages at work… here, too, the employer isn’t paying full price on the massages. The clinic is trying to increase exposure to their services, so they charge 1/2 or 1/3 the normal hourly rate to hand out lots of business cards hoping to get a few loyal patients out of the deal. Some clinics don’t charge at all for the promo.
Like Cory, I wouldn’t be much incentivized by a boozy ski weekend. And I’m sure some employees at Google would rather bring a sack lunch than endure their 5 star chefs. But I’m pretty sure that a quality workplace environment goes further toward “liking your job” than high wages. If you hate your job, but get paid a lot, you feel stuck… and used.
Kind regards,
David
Mountain View, a city in Silicon Valley, will not allow a new office development where Facebook is set to move this fall to have a cafeteria with free food for employees. The restriction aims to increase business for local food retailers.
San Francisco, home to Twitter, is proposing a similar rule that would ban new workplace cafeterias for the same reason.
Harry Glaser, cofounder of the Silicon Valley-based data visualization company Periscope Data , says that the ban could be a good idea, arguing that tech companies have a responsibility to engage with and support their communities.
Employees counter with the argument that in spite of their high wages (avg. salary $142,000) the cost of living is so high in Northern California that the free lunch is necessary for mere subsistence. Some $150,000 a year workers resort to sleeping in their vans in campgrounds during the week.
https://www.businessinsider.com/san-francisco-bay-area-ban-free-food-at-tech-companies-cafeterias-why-2018-7
I am concerned about the point Kal Lis raises about employers trying to make work central to workers’ lives, perhaps to replace other declining social organizations and old-fashioned neighborliness. When more and more of our social connections are tied up with work, we are left more disconnected and without support when those jobs go poof.
Porter, perhaps I should use the word “peanuts” instead of “perks”? :-)
David notes that not all non-cash compensation is bad. Indeed, I would rather have my employer handle negotiating my health insurance policy than handing me the cash equivalent of the employer’s contribution toward the premium and throwing to the whims of the individual market. Until we get BernieCare, employer-based group coverage is still better than going it alone (at least as long as we can keep our jobs).
But these other benefits, mere consumer goods and services like ice cream and massages whose value is not notably increased by the employer’s purchase rather than the individual’s, seem only to decrease individual buyers’ autonomy in the marketplace and skew the marketplace toward my employer’s choices. Suppose DemKota Beef decides it’s going to give each of its workers two free pizzas a month (double-check me, Kal Lis: that’s 24 pizzas a year! :-D ). Assuming around 700 workers, that’s 16,800 pizzas a year. If DemKota orders all of those pizzas from Pizza Ranch (because the employer thinks Pizza Ranch tastes better, or because the boss at DemKota plays golf with the boss at Pizza Ranch), they’ve given Pizza Ranch a nice bump but denied Thatzza Pizza, Jimmy’s Pizza and other eateries a chunk of business that would surely have gone their way instead under the free choices of those 700 workers.
Ben, you got the free massage, but then they pitch for further business? Dang—that would only raise my hackles further. Not only is my employer making market choices for me, but my employer is giving favored businesses the opportunity to subject me to their advertising on company time.
I’ll take a good pension plan (like SDRS, a public plan, brought to you by big, smart government) over weekly ice cream or massages any day.
However, you’re giving a massage while I eat ice cream… well… nah, still sticking with the solid pension.
Did you ever think the massagers were out to relieve you of your pensions instead of tensions? You know, working undercover, as it were, for your employer?
The lunch discussion is interesting, especially in the context of David’s and Porter’s comments. On the one hand, maybe a company can offer cheaper, better lunches at an on-campus cantina than employees can get fending for themselves in the individual lunch-truck/café market. If the cost of cooking and serving lunch to employees on campus is $7 a head, while the going rate for comparable meals out in the neighborhood is $9 a head, I come out behind if the boss shuts down the on-site cafeteria and pays me $8 more each day. (Actually, I’ll still come out ahead, because I’ll probably keep biking home for lunch or brown-bagging it in the park—cheaper, and I get fresh air and exercise!)
I agree that compensation is more complicated than simply maximizing paychecks. (Funny: corporations are handing out benefits on the assumption that employees are interested in more than their bottom line, but as O points out, corporations think they can justify acting with care for nothing but their own bottom line.) But strangely, while I often play the idealist who cares about many things other than money, I find that in my work decisions, I’ve always been primarily motivated by the nature of the work itself (is it work I give a darn about, work I can speak proudly of?), the paycheck, and the liberty it gives me. It’s pretty hard to offset those criteria with free ice cream or a nice couch in my office.
The “nature of the work” is no doubt an important factor. The tech companies of CA are often refusing contracts to write software for weapons and drones because their employees are less than motivated to offer their ingenuity to build things that kill strangers.
“(double-check me, Kal Lis: that’s 24 pizzas a year! :-D )”
I ask questions because I have gray hair and get easily confused. Also, it seems that as I get older I do a better job of confusing others.
I’m curious… Are pensions a good thing? I know someone who was a pastor, and some time in his 50s he stopped believing in God. For the sake of his pension, he faked belief for the rest of his ministry.
Example #2. A lady worked for Sears for over thirty years and just retired last year. She’s getting a pension. However, Sears’ pension rests almost entirely on Sears stock… which is fairly unhealthy at the moment. There’s a very real chance that the company will go the way of Younkers and she’ll have no retirement income through no fault of her own.
Kind regards,
David
Kal Lis, some call them questions; I call them community proofreading. :-)
David, pensions are a great thing. The sin in your Example #1 lies not in the pension but in the fallen pastor who lied to his congregants and his synod. The proper response for the church is not to say, “No more pensions for anyone!” but for the pastor to have been honest about his conversion and for the church to have worked out some fair arrangement (the pastor did honest work, I assume, before his conversion, and deserves some portion of his pension for that work, but the church could have justly denied him further benefits and penalized him for any benefits claimed under false pretenses).
The sin in Example #2 lies not in the principle of providing one’s employees with support in their old age but in putting that support on an unstable financial footing. The proper response for Sears is not to say, “Pensions—that was a dumb idea! Ice cream for everyone now instead before we go bankrupt!” but to make arrangements to keep the promises they made to their employees.
Hi Cory,
I agree that a pension is better than ice cream, at least in an intellectual sense. And that’s high praise because right now I’d viscerally prefer a root beer float.
But in my two examples wouldn’t a portable employer-funded retirement account have been better for the employee? Pastor can move on to a secular career without litigating the synod (and turning a matter of private conscience into newspaper headlines). And the Sears cashier has a retirement income harbored away from the capriciousness of consumers, investors, and poor managers.
Kind regards,
David
That pastor fellow found the same finding many pastors find in their young 50s, he “came to Jesus” as they say, and found the tomb empty of everything. His choices are that of anybody who chooses to no longer believe in their job. Quit, suck it up and keep doing it, or get a different job and work harder.
David, as public policy (your two examples aside), defined contribution plans as a pathway to secure public retirement has been an abject failure: https://www.cnbc.com/2015/03/20/l-it-the-401k-is-a-failure.html
Remember that Social Security was the be the general safety net for all — that also has been put in peril because of the Friedman-greed-minded corporate mindset.
Current 401K/defined benefit plans are savings plans – and as wages stagnate, nothing is left over to save for that later retirement.
All factors go into employment continuation for an employee – I am sure there are those who hate their job, but show up each day because they have to pay their bills (especially those with families, especially those with health care burdens). I am not sure in the chicken-or-egg discussion if workers are less loyal – so they do not stay, or if employers are less loyal – so employees do not stay.
Hi o,
Thank you for the interesting article. If I may summarize, 401(k)s aren’t working because:
(1) many employees don’t opt in to them
(2) employees aren’t realistic in how much they need to save
(3) employees take their savings and make bad investment choices (buy high, sell low, use a broker with high fees, take the savings as a lump sum)
(4) there’s not much money to save due to wage stagnation and rising college tuitions
I get it. This is a tough conundrum. And there’s blame on all sides. The brokers can be blamed for high fees and encouraging sub-optimal investment choices that help their firm. The employers can be blamed for using this as a cheap substitute for a more robust pension plan. But the employees also can be blamed for not getting the most out of what’s being given to them.
Almost every political issue can be framed as (a) a great society like ours would regulate/outlaw X, VS (b) the government has no business being involved in X.
Abortion: a great society wouldn’t allow abortions VS the government has no business being involved in my uterus.
Health Care: a great society wouldn’t allow health insurance companies to discriminate against pre-existing conditions VS the government has no business forcing individuals to buy health insurance or telling health insurers who they have to accept
Seat belts: a great society wouldn’t allow people to recklessly drive without seat belts VS the government has no business forcing me to wear a seat belt
And we can similarly substitute into this formula payday loans, handgun purchases, video lottery, prostitution, marijuana, gay marriage, and retirement planning.
Does a great society do retirement planning for all it’s citizens? Or does the government have no business telling me how to plan my retirement? My 8 and 5 year olds just started earning allowances this summer and their parents are learning that a key aspect of having money is having the freedom to squander it on Pokemon cards. As Dad, I can enforce limits on these transactions, and mandate saving 10% of their income each payday. But where do I get the authority to do that to another adult? If Cory snubs the 401(k) offered by his employer and buys Pokemon cards instead… that’s his right. It’s on him to adequately plan for his own retirement, or he can choose to work his whole life.
Also, I find it interesting that you loathe the “Friedman-greed-minded corporate mindset” yet prefer to trust these despicable corporations to handle the workers’ retirement planning rather than give them portable, independent, retirement accounts.
Kind regards,
David
David, your argument, “Almost every political issue can be framed as (a) a great society like ours would regulate/outlaw X, VS (b) the government has no business being involved in X” perpetuates a false dichotomy — that somehow “the government” is some outside entity of the “great society.” I prefer the inclusive (albeit liberal) notion that as Morris stated, the government is “We the people. . . ”
Pensions were an outcome of labor/management negotiations/agreements. Their destruction — not their creation — WAS the intrusion.
When it comes specifically to pensions, although government actions allowed for the demise, the true demise came at the hands of the vulture capitalists (our Freidman disciples) who clearly put the social wellbeing aside for short-term profit for shareholders. A great society does not allow the grab of its wealth and value by a very, very few. A great society does not allow for the corruption of political structures to facilitate that cash grab. A great society does not undermine the democratic (small d) institutions that give voice to the many in the opposition to the wealthy few.
To me, the whole perks/job shortage/wage/loyalty debate comes down to this: given the clear pathway it has carved, do we still embrace the Freidman ethos of profit for the few at any societal cost?
Hi o,
Sorry I didn’t make my position more clear. I agree with you that the government is a part of a “great society”. If it came across that I implied there was a dichotomy there, it was unintentional.
What I was trying to say was that the rhetoric for most political issues can be framed as (gs) “great society” vs (kgo) “keep government out”. For example, what are the talking points on each side for abortion? People who oppose abortion think it is killing babies. They think it’s an abomination. They think it’s a moral outrage that our society allows this to happen. In essence, they are saying that it would be a step forward for us, e.g. our society would be greater, if we (the people acting through the government) outlawed abortion. Which is (gs).
And what are the arguments on the other side? That a woman has the right to make her own medical decisions. That the choice should be made by the woman and her doctor. That politicians should keep their nose out of a private matter. In essence, that liberty should prevail and the government should stay out. Which is (kgo).
My observation was that the rhetoric of most political issues fits the (gs) vs (kgo) pattern: a great society would regulate/outlaw this VS the government should stay out of this. I’m not saying that (gs) is always right or (kgo) is always right. I’m not saying it’s easy to choose between (gs) and (kgo).
And perhaps most interestingly, if you look at the labels of conservative and liberal… you’ll notice that they don’t consistently side with either (gs) or (kgo). Conservatives are (gs) on abortion and gay marriage, but (kgo) on handgun purchases and healthcare.
What’s your position on retirement planning? (gs) would advocate something like an enhanced social security or laws that require employers to have a robust pension. (kgo) would basically be the status quo… employers can, but don’t have to, offer retirement benefits… and it’s up to each individual to spend or save their wages as they see fit.
You said that the status quo is bad public policy. What are you advocating instead?
“given the clear pathway it has carved, do we still embrace the Freidman ethos of profit for the few at any societal cost?”
I personally have never embraced that ethos. I’m curious, are there many South Dakota companies that you think do?
Kind regards,
David