MONEY Careers & Workplace

The Surprising Reason Your Salary Isn’t Growing

Paid in peanuts
RedBarnStudio—Getty Images

A new compensation trend could be hurting workers.

Wage growth hasn’t been this slow since 1982. In the second quarter, raises and salaries ticked up a minuscule 0.2% percent, according to Labor Department data released Friday. For private-sector workers, in fact, wage growth hasn’t been this low in the entire 35 years the Labor Department has been tracking it.

The bottom line is that even as companies have been hiring more, they’ve been able to hold the line on pay.

The likely culprit, say experts, is the continued adoption of one-time bonuses given in lieu of raises. “The raise has gone the way of the gold watch,” Gary Burnison, CEO of executive recruitment and talent management company Korn Ferry, tells the Washington Post.

‘Variable Pay’ Hits Record

What has been a frustrating trend for workers first attracted widespread attention about a year ago, after a report by HR consulting firm Aon Hewitt found that a record amount — 13% — of employee payroll costs were going to what’s termed “variable pay,” a category that covers bonuses and related performance-based payments. (In 1988, when the company started tracking it, variable pay made up only about 4% of payroll costs.)

“Performance-related pay, of which bonuses are an example, will become more and more prevalent,” predicts Iwan Barankay, a management professor at University of Pennsylvania’s Wharton School who has addressed the wage vs. bonus issue in the past.

Read next: How to Tell If Now Is a Good Time to Ask for a Raise

Companies like giving bonuses instead of raises because it requires less commitment on their part, and because they can tie payouts to company or departmental performance metrics, explained Aon Hewitt compensation, strategy and market development leader Ken Abosch in an article published by the Society for Human Resource Management.

“They feel like they need to be careful about adding to their fixed costs,” he says. “This is one of the main reasons variable pay programs are so attractive.” Incurring a one-time expense — one the company won’t have to pay again if certain performance targets aren’t met — is a better deal for them than raising wages across the board, then having to cut employees or pay if business slows down.

“The more compensation you can give in other forms, the more nimble you can be in a recession,” Linda Barrington, executive director of Cornell University’s Institute for Compensation Studies, tells the New York Times.

Workers Lose Out

But even when bonuses are paid out, performance-based pay can be a bum deal for workers. Your base salary is an important factor in calculating everything from how much interest you’ll pay on a loan to how much Social Security you’ll earn when you retire. For young adults, a lower starting salary can potentially put a drag on decades of future earnings.

A bonus-heavy pay structure also divides a workforce more sharply into winners and losers, Barankay notes. “Unfortunately, not all employees benefit from bonuses equally,” he says. “High performers can still command high fixed wages since — should an employer not offer them a raise — they can credibly threaten to get another job elsewhere.”

For everyone else, though, the picture looks a lot less rosy. “Low performers are less lucky as they [can] struggle to get a good alternative job offer and are stuck in a system where bonuses are hard to get,” he adds.

“The consequence is a situation where wage inequality will increase in the workplace,” Barankay says.

Read next: Here’s How Much The Nurse Next Door Makes

TIME pay

Why Rebellious Kids Make More Money Later In Life

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JGI/Jamie Grill—Getty Images/Blend Images Boys displaying their messy hands.

Not listening to your parents may be profitable, research shows

Who knew not listening to your parents as a kid could pay off?

New research published in the journal Developmental Psychology found that children who didn’t listen to their parents growing up ended up with a higher income, according to Quartz.

“We might assume that students who scored high on this scale might earn a higher income because they are more willing to be more demanding during critical junctures such as when negotiating salaries or raises,” the researchers wrote in the published study.

Additionally, they noted that those who were more likely to push back against their superiors as children “also have higher levels of willingness to stand up for their own interests and aims, a characteristic that leads to more favorable individual outcomes—in our case, income.”

“We also cannot rule out that individuals who are likely or willing to break rules get higher pay for unethical reasons,” the researchers added.

As Quartz notes, this isn’t the first time a study like this has linked childhood troublemaking to wages in adulthood. In fact, “agreeableness” has been found previously to equate to a lower income.

The research — conducted by the University of Luxembourg, the University of Illinois at Urbana-Champaign and The Free University of Berlin — analyzed data from 745 children in Luxembourg from 1968 to 2008.

TIME Hillary Clinton

Hillary Clinton’s New Mantra: It’s the Wages, Stupid

Decoding a major economic address from the Democratic frontrunner

It’s the wages, stupid.

That’s the magic sauce—in just four words—that Hillary Clinton believes will make her the next President of the United States. In a speech Monday to lay out her approach, she chose a more verbose version of the same message. “Wages need to rise to keep up with costs. Paychecks need to grow. Families who work hard and do their part deserve to get ahead and stay ahead,” she said. “The defining economic challenge of our time clear. We must raise incomes for hardworking Americans.”

As a theme, the approach is not new. A chart showing the divergence between median income growth and productivity growth over the last decade sat at the heart of Barack Obama’s 2012 campaign for President. “‘I’m working harder and falling behind,'” David Simas, Obama’s political strategist, explained after the 2012 election. “That was the North Star. Everything we did and everything we said was derivative of that sentiment.” As she spoke Monday, Clinton’s campaign tweeted out a version of the same chart that once hung at Obama’s Chicago campaign headquarters and now hangs in Simas’ West Wing office.

The difference now is that Clinton inherits a situation that is even more dire for American voters than the one that Obama struggled with over his past two campaigns, both of which promised improvement for middle class incomes that has yet to arrive. Even as the labor market has tightened in recent years and the national economy has continued to grow, wages have remained flat or, in many cases, declined.

A recent analysis of Census data by Democratic economist Robert J. Shapiro, whose work helped inform the Obama campaign’s approach, found that the economy shifted gears for American incomes after the 2001 recession. “Everybody declines from 2002 on relative to the 1980s and 1990s, and probably a majority of the country saw their incomes decline as they age,” he said, noting that unlike many economic indicators, this is one that voters feel directly. “It’s politically important because it’s people’s actual experience.” Shapiro found that the only two groups who saw their incomes increase on average between 2002 and 2013 were college graduates and households that were in their early 20s at the beginning of the decade.

To counteract this shift, Clinton proposed a variety of policy buckets she plans to focus on, many of which she did not detail. These include tax changes that will encourage large companies to share profits with employees, tax increases for the wealthy and new regulations of the financial sector. “The truth is the current rules for our economy do reward some work, like financial trading, for example much more than other work, like actually building and selling things, the work that has always been the backbone of our economy,” she said. “To get all incomes rising again, we need to strike a better balance.”

The focus on wages also gives a frame for Clinton to roll out a raft of other evergreen liberal policies, which could have indirect impacts on wage growth. These include better family leave policies to encourage more women to enter the workforce, lower health care costs, better early childhood education subsidies, more spending on infrastructure and “enhancing” Social Security.

Overall, the rhetoric draws heavily on the work of the left wing of the Democratic Party, including Massachusetts Sen. Elizabeth Warren, Vermont Sen. Bernie Sanders and former Clinton Administration economist Joseph Stiglitz. Though Clinton stopped short of calling for redistribution of wealth to combat inequality, a constant theme of the left, she did embrace the notion that the current economic stagnation for many Americans is a policy choice. “The choices we make in the years ahead will set the stage for what American life in the middle class and our economy will be like in this century,” she said.

At two points, Clinton contrasted her vision with the Obama Administration. First, she criticized the Justice Department and regulators for not being aggressive enough in prosecuting the misdeeds of financial firms. She also called for more financial regulation. “I will appoint and empower regulators who understand that too big to fail is still too big a problem,” she said, in a swipe at Obama, who has argued that the problem of too-big-to-fail was largely solved by financial reform in 2010.

Perhaps most important, the speech set up a contrast with Republican frontrunner Jeb Bush, who has laid out an economic vision of rising prosperity based on growing the whole economy by 4% annually, a target that few economists think can be reached. Clinton’s argument is that total growth is not enough. There also needs to be a reshuffling of the rules that makes the gains from that growth more widely distributed.

The question for Clinton is much the same as the challenge faced by Obama. She may have diagnosed the disease in a way that the American people have endorsed in the past, but can she deliver the antidote? Republicans, who have a dramatically different world view, have been able to block many of Obama’s reforms, and would likely have similar power under a Hillary Clinton Administration. There is also a skepticism, shared by many liberal economists, about just how much the reforms she laid out will impact incomes, which have been under pressure because technology and global competition have put a cap on prices and an increase in the unemployment rolls.

But that is a question for a later time. The first jobs for Clinton are to win the nomination and then the White House. And by borrowing heavily from her successful predecessor, her team believes she has a winning formula.

TIME Innovation

Buying Food in Bulk Is a Waste of Money

The Aspen Institute is an educational and policy studies organization based in Washington, D.C.

These are today's best ideas

1. Stop buying food in bulk.

By Eric Holthaus in Slate

2. In rural India, delivering clean drinking water requires lots of power. Enter the solar desalinator.

By Julia Sklar at MIT News

3. Find out why we might be wrong about America’s stagnant wages.

By Josh Zumbrun in the Wall Street Journal

4. We’re overprescribing antipsychotic drugs for our kids.

By Nancy Shute at NPR

5. When robots make work obsolete, will humanities education make a comeback?

By Jonathan Malesic in the New Republic

The Aspen Institute is an educational and policy studies organization based in Washington, D.C.

TIME Ideas hosts the world's leading voices, providing commentary and expertise on the most compelling events in news, society, and culture. We welcome outside contributions. To submit a piece, email ideas@time.com.

TIME Wages

This Big Retailer Just Raised its Minimum Wage for U.S. Workers — Again

Richard Cadan Media Kitchen cabinet fronts made at Ikea’s factory in Älmhult.

Company is already reaping the benefits of the last pay hike

Last June, Ikea announced it would raise its hourly minimum wage in U.S. stores from $9.17 to $10.76, a 17.3% hike. Now, almost exactly one year later to the day, Ikea is doing it again.

The Swedish furniture giant says the pay will go up to $11.87, a 10% increase for Ikea and a whole $4.62 above the current U.S. federal minimum wage of $7.25. (There is a movement underway to bring that up to $12 by 2020.) The hike will take effect on the first day of 2016 and will have an impact on 30% of Ikea’s U.S. employees.

This is a smart business move by Ikea, which has been expanding globally at a rapid pace, and it is one that will inevitably reap good P.R. The last time around went well for the company: Rob Olson, Ikea’s U.S. CFO, told the Huffington Post that in the six months since the last hike, Ikea has had 5 percent less worker turnover and is already attracting better talent.

Ikea was one of Fortune’s Best Companies to Work For in 2006 and 2007, but then dropped off the list. Perhaps its continued attention to better worker wages will get it back on.

MONEY Benefits

Uber Driver Was an Employee, According to California

The fast-growing ridesharing service could be on the hook for plenty of new expenses.

A former Uber driver in a labor dispute with the company was not an independent contractor, the California Labor Commissioner has ruled. That means the fast-growing ridesharing service could be on the hook for minimum wage payments, unemployment insurance, and other job-related expenses.

The California Labor Commissioner’s ruling stated, in its analysis,

Defendants [Uber] hold themselves out as nothing more than a neutral technological platform, designed simply to enable drivers and passengers to transact the business of transportation. The reality, however, is that Defendants are involved in every aspect of the operation….

Defendants control the tools the drivers use….

The passengers pay Defendants a set price for the trip, and Defendants, in turn, pay their drivers a non-negotiable service fee….Defendants alone have the discretion to negotiate [a cancellation fee] with the passenger. Defendants discourage drivers from accepting tips because it would be counterproductive to Defendants’ advertising and marketing strategy.

…Aside from her car, Plaintiff [Barbara Ann Berwick, the driver in the case] had no investment in the business….But for Defendants’ intellectual property, Plaintiff would not have been able to perform the work.

In light of the above, Plaintiff was Defendants’ employee….

Correction: A previous version of this post, including a video, stated that the California ruling applied to “Uber drivers.” In fact, it applied to a single driver, Barbara Ann Berwick.

MONEY Housing Market

Renting a Home Could Become the New Normal

Residential Real Estate As City Becomes The Least Affordable U.S. Housing Market
Bloomberg—Bloomberg via Getty Images Pedestrians walk past a "For Rent" sign that is displayed outside of an apartment building in the Mission district of San Francisco, California, U.S., on Thursday, May 7, 2015.

Homeownership rates have been falling for the last decade.

Is renting a home the new American dream? A report by the Urban Institute projects that even after the housing crash and the Great Recession are a distant memory, homeownership rates in America will continue to decline.

The report estimates that between 2010 and 2030, the majority (59%) of the 22 million new households that will form will rent, while just 41% will buy their homes.

The homeownership rate has been falling since 2006, when the housing bubble began pricing out many would-be homeowners — and the recession furthered that trend. In 2006, the homeownership rate was 67.3%; it now sits at 63.6%, even lower than it was in 1990, according the U.S. Census’ most recent American Community Survey.

But even the economic recovery won’t reverse that trend, according to the Urban Institute. It offers six reasons:

  1. Wages. Real wages have declined among adults ages 25 to 34 since 1996. “Even for young adults with good jobs, low vacancy rates and high rents make it more difficult to save,” the report says.
  2. Student loan debt. Total outstanding debt was about $300 billion in 2003; now it is over $1.3 trillion. Long-term debt makes additional long-term debt less appealing.
  3. Delayed household formation. Both women and men are waiting four years longer before marriage than in 1980. “Because of the delayed marriage and childbearing, homeownership is apt to occur later. At a result, people will spend less of their lives as homeowners, placing a drag on the homeownership rate,” according to the Urban Institute.
  4. Lingering effects of the recession. Roughly 7.5 million Americans lost their homes during the recession; most will have a hard time buying a new one, dragging down the homeownership rate.
  5. They’re not that into homebuying. More Americans are consciously choosing to rent over buy. One study looked at “prime candidates” — married couples earning at least $95,000 annually who have at least one child. “Even for this group, after controlling for race and ethnicity, the homeownership rate declined from 87.3% in 2000 to 80.6% in 2012,” the report says.
  6. Higher borrowing standards. The report says that lenders are still “historically tight,” particularly among borrowers with lower credit scores.

The report also considered changing demographics — a majority of new households formed in the U.S. during the next two decades will be non-white — and while those groups traditionally have lower homeownership rates, the Urban Institute found that will not contribute significantly to overall homeownership rates in the future. That story is a mixed bag, however.

“For at least the next 15 years, whether the economy grows slowly or quickly, the homeownership rate for African Americans will decrease while the rate for Hispanics will increase,” the report found. “More than 50 percent of the 9 million new owners between 2010 and 2030 will be Hispanic, nearly one-third will be other races or ethnicities, 11 percent will be African American, and only 7 percent will be white.”

The shift from owning to renting means that many more rental units should be built, the Urban Institute says.

“This change will create a surge in rental demand from now until 2030 that we are unprepared to meet,” it says.

It also suggests that mortgage lending standards be relaxed to nudge more would-be renters to buy their homes.

That conclusion doesn’t sit well with everyone, however.

Logan Mohtashami, a California-based loan officer, says the notion that lending standards are tight is a myth.

“There remain a number of highly respected housing ‘gurus’ who continue to profess that it is unfairly tight lending standards, not the lack of qualified buyers that are suppressing a housing recovery. The difference is not academic,” he says. “A quick review of the requirements for some of mortgage loans available may surprise you.”

VA loans require no down payment, for example, he notes. And buyers can get other mortgages with credit scores as low as 560, with 50% debt-to-income ratios, or down payments as low as 3%.

“At this point all you can do is bring back 0% down loans and stated income loans for wage earners,” said. “Look who is really pushing the tight lending thesis. People in New York, D.C., San Francisco. What I call economic bubble cities. Main Street America gets this thesis I am saying.”

Read next: Should You DIY These 5 Home Improvements?

More From Credit.com:

TIME American economy

America Is Finally Getting a Raise

Operations Inside The Mercedes Benz International Assembly Plant
Bloomberg—Bloomberg via Getty Images

The consumer could lead the U.S. economy to the next, more robust, phase of the recovery

America’s economic expansion is now entering its seventh year. Total output and jobs have surpassed their previous peaks, while the stock market has soared nearly 200% since its 2009 lows.

At the same time, too few jobs have been added in this recovery, and there remains significant slack in the labor market. This is underscored by one statistic in particular: the fact that wage growth has been historically low during this recovery compared to those of the past. As Spencer Jakab at The Wall Street Journal has pointed out: “Since the end of the recession, the average hourly earnings of production and nonsupervisory employees have grown just 2% a year, on average — a percentage point less than in the last recovery.”

Now it looks like that trend might be reversing. Friday’s job report showed that the average hourly worker earned 8 cents more per hour in May than he or she did in April, while wage growth over the past three months is close to the 3% we’ve seen in past recoveries:

This chart from the Bureau of Labor Statistics shows the U.S. economy is heading in the right direction wage-wise:

Screen Shot 2015-06-05 at 9.12.07 AM

It’s difficult to overstate how important wage growth is to promoting faster economic growth. U.S. GDP is composed of mostly consumer spending, and the recession put a huge dent in the average American’s capacity to consume. That’s one reason why the Federal Reserve has done everything it can to push the economy toward full employment. A tight labor market forces firms to compete for workers with higher wages, which can lead to a virtuous cycle of wage gains and consumer spending.

Unfortunately, the U.S. consumer hasn’t been motivated to spend his or her wage gains, or the tens of billions of dollars consumers have saved in recent months as a result of cheaper gas prices. As I wrote last month, this extra money is showing up in a higher savings rate. It appears that consumers are choosing to save or pay down debt rather than spend their extra cash.

That said, there is often a significant lag between big macroeconomic shifts — such as cheaper oil, or rising wages — and consumer behavior. A few more months of solid wage gains like we saw in Friday’s jobs report and the American consumer could be primed to lead the U.S. economy to the next, more robust, phase of the recovery.

Editor’s note: The original version of this article suggested that the reason for low-wage growth is because the U.S. economy has added relatively more part-time and low paying jobs compared with other recoveries. In fact, most jobs added since the recovery have been full-time. This article has been updated to reflect this.

TIME Careers

Why High School Athletes are Cool Even After Graduation

(c) davepeetersphoto

They're just better at everything

Nerds are supposed to get their revenge after graduation.

Sure, high school jocks are popular. But as mothers across America tell their uncoordinated children: Study hard, get good grades, and you’ll have the last laugh by making more money later in life.

However soothing as this tale may be to athletically challenged youngsters, economists say it’s a lie. Former high school athletes “display significantly more leadership, self-confidence, and self-respect than those who were active outside of sports—such as being in the band or on the yearbook staff,” according to a recent study published in the Journal of Leadership & Organizational Studies (via The Atlantic).

Not only that, but former high school athletes retain these qualities as long as 60 years after they hung up their varsity jackets. The Atlantic also points to several other studies that former athletes earn “from 5 to 15 percent” more than non-athletes.

The jury is still out on whether this statistical difference is because the act of playing sports in high school teaches kids skills like hard work and determination, or because kids with those qualities gravitate towards sports in youth. Either way, it would appear that there are more reasons than fleeting glory to go out for the football team this fall.

MONEY Unions

Snarky Journalists Have Crude, Wrenching Public Debate About Unionization

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Mart Klein—Getty Images/Ikon Images

So much for secret ballots.

Last month, some editorial members of Gawker Media, owner of various web properties including Deadspin, Jezebel, Gizmodo, and of course, Gawker.com, announced they planned to form a union.

Now, with an election scheduled for next week that will decide whether the company will unionize, Gawker writers have made their votes and opinions on the plan public in a post published Thursday. The discussion offers a rare look at how wrenching labor organization can be. Some pro-union writers have been so turned off by the process that they’ve decided to cast their ballot against unionization efforts.

“I am an avid proponent of unions, a leftist, and am perpetually distrustful of those in power—especially those that hold sway over my own employment,” writes Deadspin staff member Kevin Draper. “Yet on June 3rd, I am going to vote against Gawker Media editorial staffers unionizing. That is how f— up this entire process, from start to apparent finish, has been.”

Draper goes on to list a set of grievances that turned him against unionization, including a perceived lack of communication and transparency from union supporters and an election the writer feels was scheduled too soon.

Those issues are echoed by a number of other staffers, including Deadspin columnist Drew Magary, who added that the push toward organization had turned many staffers against one another (“This has created a GALACTIC amount of acrimony within Gawker”). Magary also voiced concerns about the everyday implications of unionization (“I f***ing hate meetings.”). Stef Schrader, an editor for Jalopnik, questioned whether a raise that would include union dues could force the company to cut into other benefits. “I don’t agree that we need to pay an outside entity to negotiate these things for us,” posted Schrader.

Most staff commenters appear to support unionization.

“I am voting yes on the union,” wrote Hamilton Nolan, Gawker’s longest-tenured writer and a major force behind the drive to organize. “This has been a truly ‘grass roots’ organizing process in the sense that we’ve been making it all up as we go along. There’s no doubt all the communication efforts have not been perfect. But I really, really hope that everyone will think about the big picture: a vote for this union is a vote for unity. It’s a vote to meld all of our interests together as one. And beyond the practical benefits for us, it’s a really important symbolic vote for our entire industry. It’s the first step of a movement that could end up helping a lot of people.”

If the pushback against organization by some writers comes as a surprise, it shouldn’t. Online media companies, despite being populated by many young city-dwellers who, as a demographic, tend to skew towards the left, have generally been reluctant to unionize. If Gawker does become a union shop, it would be the first major new media company to do so.

Why is the digital press so reluctant to band together? As the Washington Post explained in January, a combination of generational and economic forces tend to make unionization less palatable to online scribes. Younger workers are typically less familiar with unions and more apt to see themselves as personal brands instead of as part of a collective.

Another reason for web media’s union-phobia may just be that many journalists don’t feel they have it quite so hard. “They tend to think that because of their education and their talent, they don’t need [a union],” said Freddy Kunkle, the co-chair of The Washington Post’s Guild unit, in an interview with the Post. “What they’re doing is not coal mining: It’s not dangerous; it’s not dirty. What are they going to get out of it?”

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