The NYT ran a piece saying that the Federal Reserve Board is raising interest rates, in spite of weak wage growth, because of the more rapid growth in non-wage compensation. If this is true, then its policy is badly mistaken.

The piece tells readers:

"The average worker received 32 percent of total compensation in benefits including bonuses, paid leave and company contributions to insurance and retirement plans in the second quarter of 2018. That was up from 27 percent in 2000, federal data show."

While there has been a substantial rise in the non-wage share of compensation over this period, that is not true in the last three years. The Bureau of Labor Statistics reports the non-wage share of compensation was on average 31.7 percent in the second quarter of 2018. That is the same as it was in the first quarter of 2017 and in fact the first quarter of 2015. There has been no clear upward movement in this measure in the last three years. This means that if the Fed is claiming that growing non-wage compensation is making up for a lack of wage growth, then it is not relying on the data.

The piece also tells readers:

"The White House Council of Economic Advisers calculates that increasingly generous paid leave benefits mean that the average American worker is getting an additional half-day of paid leave each year, compared with five years ago."

Assuming this calculation is correct, if we start with a 250 day work year (50 weeks at five days a week), an extra half day of paid leave would be equivalent to a 0.2 percent increase in pay. Since this rise in paid leave took place over five years, it would mean that the move to more paid time off would add 0.04 percentage points to reported wage growth.