By JOI PRECIPHS Staff Reporter of THE WALL STREET JOURNAL February 1, 2006; Page A8
WASHINGTON -- Civilian wages grew and benefit-cost increases slowed in the fourth quarter, but overall, employee paychecks failed to keep pace with inflation last year, the Labor Department said.
Total compensation costs -- wages and benefits -- for civilian workers rose a seasonally adjusted 0.8% in the October-December period, following a similar increase in the third quarter. Benefit costs for the period rose 1.1%, while wages and salaries trailed with a 0.8% increase, the department said.
Compensation costs rose 3.1% for all of 2005, down from a 3.7% increase the year before. Last year's increase was the smallest annual increase since 1996. Wages and salaries were up 2.6% for the year, not enough to compensate for inflation, which averaged 3.39%. Meanwhile, the costs of benefits such as health insurance rose 4.5% for the year, a marked slowdown from the 6.9% surge in 2004.
"Some commentators have been arguing that real wages are falling because rising health-care costs force employers to plow more compensation into health benefits. Today's report further challenges that view," said researcher Jared Epstein of the Economic Policy Institute, in an emailed statement. "While benefit costs are of course rising, they are doing so considerably more slowly than in recent years, in part due to diminished employer-provided health-care coverage. In addition, compensation itself is lagging inflation, despite continued strong productivity growth."
Lagging wage growth doesn't appear to have affected consumer confidence. The Conference Board said its consumer-confidence index for January reached 106.3, its highest level since June 2002. December's index reading was a revised 103.8, the New York-based research group said.
The proportion of consumers saying jobs were plentiful rose to 26.9% from 23.3% in December, the largest one-month surge since December 1999. The proportion saying "jobs hard to get" fell to 20.3% from 22.5%, the report said.
Though the reading was driven primarily by consumers' brighter view of the job market, said Lynn Franco, the Conference Board's research director, that hasn't translated into greater optimism about the near future. "In fact, the gap between consumers' assessment of current conditions and their expectations remains wide," Ms. Franco said in a release.
Consumers still remain wary about business conditions improving dramatically over the next six months, the report said. Labor-market expectations also were "mixed," with slight declines in expectations for job availability in the coming months, as well as a drop in those anticipating income gains.