Call to Action: Strengthening Employee Benefits

“People think these things just kind of happen out of nowhere. These are all purposeful policies. They are the scaffolding, which dictates people’s experiences in the form of capitalism that we practice in this country.”
Dr. Sylvia Allegretto, Senior Economist at the Center for Economic and Policy Research

Employee benefits refer to tangible or intangible compensation employers provide. The most common include salary, health insurance, life insurance, disability insurance, paid holidays, paid sick leave, and retirement accounts. Other perks which may lure potential employees to the workplace include free cafeterias and on-site gyms, daycares, and medical care.

However, despite these job perks, the US needs to catch up to other developed nations in basic employee benefits. In fact, a recent survey conducted by human resources firm Zenefits ranks the US last, behind Latvia, South Korea, and Mexico. This is primarily because many of the things considered perks or benefits in the US are mandated rights in other countries.

While many might think that the gig economy, freelancing, or remote work have slowly eroded jobs with benefits, few benefits have decreased over time—the protections were never there to begin. There has been very little legislation to increase workers’ rights: “People think these things just kind of happen out of nowhere. These are all purposeful policies. They are the scaffolding, which dictates people’s experiences in the form of capitalism that we practice in this country,” says Dr. Sylvia Allegretto, a senior economist at the Center for Economic and Policy Research in Washington, D.C.

“We are one of the richest countries in the world. And yet we have coined the term ‘working poor.’ It’s embarrassing. Nobody in the United States of America who gets up and goes to work every day should fall below the poverty line. Yet so many of them do,” says Dr. Allegretto. “We have not had a fair distribution of the exploding economic pie over the last 50 years. Where did the extra pie go? It has come from the broad middle class and handed to the richest amongst us. That’s what’s been happening. We can undo that by ensuring workers get fair wages, benefits, and retirements along with the wealthy. We have deep problems, and we could have a much better society if we spread the wealth and the income around a bit.”

Keep reading to learn more about the lagging worker benefits in the US, what the primary causes are, and potential solutions.

Dr. Sylvia Allegretto is a senior economist at the Center for Economic and Policy Research in Washington, D.C. She is also the former co-chair of the Center on Wage and Employment Dynamics at the University of California, Berkeley.

She earned her PhD in economics from the University of Colorado and worked for several years at the Economic Policy Institute in Washington, D.C., where she served as a research associate. Her research interests encompass many topics, including low-wage labor markets, teacher pay, public employee compensation, long-term unemployment, inequality, minimum wages, and sub-minimum wages received by tipped workers. She is a prolific author and has co-authored several editions of The State of Working America. Her most recent publications have included “Parental Labor Supply: Evidence from Minimum Wage Changes,” “Teacher Pay Penalty,” and “Workers and the Covid-19 Recession.”

For the most part, benefits in the US have lagged behind other developed nations. Some industries have increased worker benefits over time, primarily due to their need to be competitive for hiring purposes rather than thoughtful legislation that helps all workers. Increases in benefits are almost exclusively limited to white collar high-paying jobs. Many industries have few to no benefits at all: “When you see the data on workers who get benefits, it’s at the behest of their employers. Tip workers, who are mostly in bars and restaurants, get almost nothing in the way of benefits,” shares Dr. Allegretto.

Here are some benefits that workers get in other countries but are not guaranteed in the US.

“We are one of the only advanced countries in the world that mandates no paid leave whatsoever. It’s not even that you don’t get a vacation, but you don’t get paid sick leave,” shares Dr. Allegretto. “If you have a family emergency, you can’t take off and still get paid. This is not new and is one of the biggest things that hasn’t changed. This is a lack of federal policy, which is why we need universal legislation.”

Some states have taken it upon themselves to mandate paid leave. Workers in Arizona, California, Colorado, Connecticut, Maryland, Massachusetts, Michigan, New Jersey, New Mexico, New York, Oregon, Rhode Island, Vermont, Washington, and Washington, D.C. have mandatory paid sick leave. Maine and Nevada have laws requiring accrued paid time off, not limited to sick time.

Eleven states mandate paid time off for family leave, and California, Connecticut, Massachusetts, Rhode Island, and Vermont require employers to provide vacation time. However, the lack of comprehensive federal legislation leaves most Americans without guaranteed paid time off.

Paid time off for holidays is also not federally mandated in the US. Holiday pay is a relatively common benefit for some industries, but others get none: “Eighty-one percent of private sector workers have access to paid holidays. In the accommodation and food industry, which is a low-wage sector, only 38 percent get paid holidays. But don’t assume it’s generous. Usually, paid holidays are five days or less,” says Dr. Allegretto. She notes that the number of accommodation and food industry employees getting paid holidays is deceptive because those who do receive paid holidays are typically limited to management.

By contrast, Austria has 13 mandated paid holidays for all employees, and Sweden has 11. While some European countries don’t mandate paid holidays, other mandated paid leaves include sick days and vacation.

A liveable wage is defined as the minimum amount of money needed for a worker to meet basic needs. This includes housing, food, utilities, medical care, and transportation. Liveable wages will vary based on an area’s cost of living and the number of adults and children in a family.

According to the Living Wage Calculator developed by the Massachusetts Institute of Technology, the living wage for a family of two adults and two children is $25.02 per hour or $104,077.70 per year. This assumes both adults are working at that wage.

However, the federal minimum wage in the US is only $7.25 and hasn’t been increased since 2009. And it is worse in many states for employees who earn tips at a measly $2.13. “Why is the federal $2.13 sub-minimum wage for tip workers still around? April Fool’s Day this year literally marked the 32nd anniversary of $2.13,” asks Dr. Allegretto. “It’s because of the other NRA, the National Restaurant Association. They have lobbied to keep it that way.”

While many of the benefits listed here have never existed, one has shifted significantly. “One of the biggest changes over the last 50 years would be the switch from pensions to 401Ks. Almost nobody gets pensions anymore. If you look at a graph, you would see pensions diving down to almost nothing, while on the same graph, 401Ks went in the opposite direction. It’s been a big giveaway to Wall Street,” explains Dr. Allegretto.

“A pension is like Social Security. It is something you can count on. The shift to 401ks was a massive negative shift away from making sure workers would have a solid retirement. Pensions and Social Security helped reduce the poverty rates of aging workers because before them, if you couldn’t work, you just fell into poverty. Now, without pensions, we have aging cohorts that have no money because they have not been saving, have had historically low wages, and exploding costs and housing,” says Dr. Allegretto.

“Social Security benefits were never meant to be your complete retirement again. It was a three-legged stool: pensions, Social Security, and your savings. Now pensions are gone, and it’s harder and harder to save. This is a disaster that is playing out right now.”

While there are many reasons why worker benefits in the US have lagged behind other developed nations, Dr. Allegretto believes these are the two primary reasons.

Lobbying is also called paid advocacy. Interest groups pay professionals to develop relationships with politicians and persuade them to enact, repeal, or steer clear of legislation for the organization’s benefit, not necessarily the American public. “Our system is broken. It’s Citizens United. It’s the vicious circle of lobbyists’ money that goes to the politician, who then makes the decision,” explains Dr. Allegretto.

Currently, corporations and organizations have no limit on the contributions they can make to a politician. “The waiter or waitress isn’t on the steps of the Capitol. Instead, it’s groups like the National Restaurant Association. There’s too much money in the government.”

In fact, it was lobbying from Herman Cain, former president of the National Restaurant Association, that was instrumental during Bill Clinton’s administration in freezing the federal minimum wage for tipped employees at $2.13. “No one is saying this is good economic policy,” says Dr. Allegretto. The loudest and most wealthy voices are getting the policies they want, while those who don’t have the same kind of access suffer the consequences.

In 1983, more than 20 percent of the American workforce belonged to a union. In 2022, that number had dropped to only 10.1 percent. The decline in unions has decreased bargaining power and, subsequently, the benefits and compensation of employees. “Unions negotiate for a complete package that includes pay and benefits for all employees. When we had stronger unions and a higher density, that not only helped union members but also helped people who weren’t in unions. Particularly during tight labor markets, employers noticed they better start offering some benefits if they were going to get any workers,” explains Dr. Allegretto.

“But we completely dismantled unionization with purposeful policy. We passed global trade acts that put our grown men and women up against near-slave labor conditions for workers and children in places like China. American wages plummeted, and unions were broken.”

“The laws on the books aren’t protecting workers the way they should,” she adds. “We have too little daylight between millionaires and billionaires illegally breaking union drives. But they somehow get away with it every time.”

Since the problems are rooted in systemic issues in government legislation, solutions to strengthen employee benefits also need to start there. Many of these issues are being tackled at the state level, with places like California and Washington DC implementing comprehensive policies that benefit employees.

The first thing, according to Dr. Allegretto, that can help strengthen employee benefits is to limit the money in politics. When wealthy individuals or organizations can contribute unlimited amounts of money to politicians or political causes, it undermines the principle of equal representation. Candidates who receive large donations may be more likely to focus on the interests of their wealthy donors rather than the broader population they are supposed to represent.

“They want you to believe it’s just unfortunate if you are having a hard time, and we’re all doing better overall, and capitalism is the best for everybody. No, it’s not,” says Dr. Allegretto. “It’s all purposeful policy, with purposeful outcomes. Citizens United was done on purpose. It has allowed billionaires and millionaires to be too influential in government policy.”

“The wealthy get what they want, and then it’s a vicious circle of getting the returns that we thought we would get with fewer worker benefits,” she says. “We dictate the level of poverty we’re willing to accept in our country.”

When unions were first established in the 19th century, their mission was to protect workers’ rights. Unions still accomplish this goal, and increasing them can help strengthen employees’ benefits and well-being across all industries. “Unions provide a level playing field to workers. We need to allow employees to form unions and be able to get to a first meaningful contract,” says Dr. Allegretto.

Since 2021, the Protecting the Right to Organize (PRO) Act has been pending legislation that will help improve access to unionization. According to the White House,

“We owe it not only to those who have put in a lifetime of work, but to the next generation of workers who have only known an America of rising inequality and shrinking opportunity. All of us deserve to enjoy America’s promise in full—and our nation’s leaders have a responsibility to deliver it. That starts with rebuilding unions. The middle class built this country, and unions built the middle class. Unions give workers a stronger voice to increase wages, improve the quality of jobs and protect job security, protect against racial and all other forms of discrimination and sexual harassment, and protect workers’ health, safety, and benefits in the workplace.”

One of the best ways to increase unions would be to increase sectoral bargaining: “You should be able to unionize all Starbucks at once or all baristas at once,” explains Dr. Allegretto. “At a minimum, you should be able to do it locally or within a state or region.”

Raising the minimum wage nationwide will help ensure all Americans can earn enough money to meet their basic needs. Dr. Allegretto notes that during the pandemic, for the first time, there were real wage increases for the lowest earners, but it is unclear if those increases will be permanent or not.

Currently, 30 states have a state minimum higher than the federal minimum. As of July 2023, the highest minimum wage was in Washington, D.C. at $16.10 per hour. Washington State was right behind, with a state minimum wage of $15.74.

For most Americans, healthcare is tied to their employer: “We have to go to universal healthcare. This is another thing we do that most other developed countries have got right. Why is our healthcare the way it is? Who are the winners? It’s the middleman and the insurance companies,” says Dr. Allegretto.

Implementing universal healthcare will have numerous benefits to employees and employers alike. It can reduce business operating costs and help ensure their employees have adequate access to care. It also allows employees to shift jobs, stay home with children, or attend school without worrying about losing healthcare. Lastly, universal healthcare will allow more people to branch out as freelancers, self-employed, or small business owners.

Kimmy Gustafson

Writer

Kimmy Gustafson is a freelance writer with a passion for sharing stories of bravery. Her love for world-traveling began when her family moved to Spain when she was six and since then, she has lived overseas extensively, visited six continents, and traveled to over 25 countries. She is fluent in Spanish and conversational in French. When not writing or parenting she can be found kiteboarding, hiking, or cooking.