Leave Benefits
The Employers’ Guide To Consolidated, Non-Consolidated & Unlimited Leave Policies
Here's what you need to know about leave policies and how to make them work for your organization.
June 21, 2024

ARTICLE | The Employers’ Guide To Consolidated, Non-Consolidated & Unlimited Leave Policies

Leave practices and policies can be wildly inconsistent between states, industries, and organizations - even internally - and yet they are regularly one of the top factors employees consider when evaluating and taking stock of their prospective and/or current compensation packages and job situations, generally.

Further, according to Forbes’ best employee benefits of 2024 reporting, leave is one of the most notably undervalued benefit package components in terms of the gap between the importance ascribed to favorable leave policies by employees vs. the importance ascribed to favorable leave policies by employers.

The combination of the wide-ranging leave policies employees may have encountered over the course of their careers and the large number of employers that are overlooking the significance of leave from the employee perspective provides an opportunity for employers to better align leave policy with larger organizational goals while gaining a competitive edge over other players in their respective industries at the same time.

Paid Leave In the USA

Despite that the idea for paid leave first started gaining steam globally around 1910 after President Taft proposed a law (that never came to pass) requiring 2 to 3 months of mandatory paid vacation for every American worker, the US has lagged behind its international, industrialized peers ever since in terms of ensuring its domestic workforce has access to paid time off from their labor.

In the years since, many state governments have stepped in to require private employers to provide some forms of paid leave in some situations, and many private employers have of course gone above and beyond state minimums as part of a compensation package designed to attract, retain, and optimize the output of talent, but the end result is a mess of policies and expectations that can vary considerably depending on a number of different variables.

The net effect of those varying policies is that a little less than 8 out of 10 workers on average in the US have access to some form of paid leave, with about 79% of US workers having access to paid sick leave, 77% of US workers having access to paid holidays, and 75% of US workers getting some form of paid vacation.

Non-Consolidated Leave vs. Consolidated Leave vs. Unlimited Leave

Even among similarly situated employers, there remains at least 3 distinct approaches for how best to navigate this shifting leave policy landscape - the standard non-consolidated leave approach, the growing consolidated leave approach, and the emerging unlimited leave approach.

There are, however, disadvantages and advantages to each of the potential leave approaches that comparably positioned organizations may weigh very differently and are best addressed on a case-by-case basis in light of the circumstances specific to a given employer.

Non-Consolidated Leave

Non-consolidated leave policies separate different potential types of leave into categories with a separate amount/tranche of leave time offered for each category. For example, in non-consolidated leave plans an employee is offered a set amount of paid sick days during a given term/year, as well as a set amount of paid vacation days, and a set amount of paid/personal time off (PTO) to be used for personal business, etc.

According to the most recent available data from the Bureau of Labor Statistics, about 56% of US employees are subject to non-consolidated leave policies, which, while still a majority, is down considerably in just the last few years and is hanging onto that majority status by a thread.

This kind of leave segmentation is in many ways more the natural evolutionary byproduct of paid leave plan administrators adding new types of leave piecemeal over time than it is a cohesive policy conceived in pursuit of some specific aims, but there are nonetheless advantages that non-consolidated leave policies can potentially wield over the newer, less-structured alternatives.

The main advantages that non-consolidated leave policies provide employers is a greater degree of hands-on control that may enable them to better tailor leave policies in line with the needs of both the organization and the employees.

For example, sick days can be deemed to rollover from one term to another in order to encourage employees to come to work when capable while knowing that those days aren’t lost if they find themselves experiencing a more significant, contagious, and/or long-term illness or injury down the road.On the other hand, vacation days may be deemed not to rollover, thereby encouraging employees to take the breaks that have been afforded them in order to relax, recharge, and return to work ready to produce at a high level, which is in all parties’ mutual interest.

Further, sick days, personal days, and vacation days can potentially be set to accrue at different rates based on different inputs in line with business needs, as well.The disadvantages to non-consolidated leave policies, however, are largely centered around enforcement difficulties and the additional administrative expenses incurred to manage them. While employers may have an interest in having their employees use sick days only when they are sick, the process for confirming and documenting proper leave utilization can be cumbersome, invasive, and/or lead to ill will between workers and management that is outsized relative to the perceived advantages that are attained.

Consolidated Leave

In consolidated leave policies, time made available for employee leave - whether for vacation, illness, personal business, or otherwise - all comes out of the same collective pool (sometimes referred to as a PTO bank) with no need for segmentation into leave categories.

As of the most recent data available, about 44% of US workers who have some kind of PTO work under consolidated leave plans, although that number climbs to over 50% when measuring only workers who receive paid vacation days (as of 2023), in contrast to the fewer than 25% of workers with paid vacation who had consolidated leave plans back in 2010.

Clearly, consolidated leave plan adoption has been on the rise, and while they do not share some of the employer-tailoring potential that non-consolidated plans can offer, consolidated plans do have the benefit of allowing employees to tailor their leave utilization in line with their own motivations and interests, which is a selling point in its own right and a meaningful one from the vantage point of many employees.

Consolidated plans also immediately remove the sick-day skepticism that can poison working relationships between workers, managers, and coworkers alike, in addition to cutting down on costs associated with collecting, tracking, and storing certain leave utilization documentation.

Unlimited Leave

The latest trend in leave policy takes consolidated leave flexibility one step further by not only consolidating the different types of leave into one PTO bank, but also removing the cap on the number of days in that bank so that the number of PTO days available to a given employee is technically unlimited.

According to a recent report from the International Foundation for Employee Benefit Plans, about 9% of private employers surveyed had adopted an unlimited PTO policy, which comports with the 8% of companies offering and 10% of employees being offered unlimited PTO as reported by Zippia.

Further, 87% of those employers offering unlimited-PTO have begun doing so within the last 4 years, and Indeed reports that the number of job listings referencing unlimited PTO grew by 40% between 2019 and 2023, so the growth trajectory for unlimited leave is even steeper than that of consolidated leave has been.

While an unlimited PTO model may sound like a dream to many workers and a nightmare to some employers, the reality so far has in many ways been the opposite.Workers who may envision themselves going on regular extended sabbaticals more often than not actually find themselves taking fewer days off work under the unlimited PTO model than they did with a set number of PTO days. Such employees often cite a heavy workload, social stigma, coworker/manager coordination, and not wanting to offload responsibilities to others as some of the main reasons for underutilizing the opportunity to take leave. In fact, workers with unlimited PTO take only an average of about 13 PTO days per year.

Employers, on the other hand, who may be reluctant to adopt the unlimited leave model for fear of mass employee absenteeism not only end up with employees working more than before, they also can eliminate carrying the liabilities associated with accrued vacation days on their accounting books and can avoid paying out on unused PTO to terminated employees (as is required in 19 states: CA, CO, IL, IN, LA, ME, MD, MA, MT, NE, NH, NM, NY, NC, ND, OH, RI, WV, WI) simply because there are no longer any PTO days that have accrued.

Those kinds of advantages may become increasingly hard for employers to ignore, even as employees adjust to the new system and begin to utilize it more to their own advantage, as well.

PTO Laws By State

While a majority of states (27) have some form of PTO law on the books, the scope ranges from relatively small (as in Louisiana's requirement that each employee be given one day of PTO for jury duty or Virginia’s requirement that home health workers who work at least 20 hours per week receive one hour of paid sick leave for every 30 hours they spend on the job) to much more broad in application (like Nevada’s law requiring employers with more than 50 employees to provide 0.01923 hours of PTO (capped at 40 hours per year) for every hour worked, which employees can use for any purpose.

The following states have enacted at least one law with regard to PTO for private employers/employees, the vast majority of which focus on sick and family leave:

  • Alabama, Arizona, Arkansas, California, Colorado, Connecticut, Delaware, Georgia, Illinois, Louisiana, Maine, Maryland, Massachusetts, Michigan, Minnesota, Nebraska, Nevada, New Hampshire, New Jersey, New Mexico, New York, Oregon, Rhode Island, Tennessee, Vermont, Virginia, and Washington

The following states have no current laws mandating any form of PTO:

  • Alaska, Florida, Hawaii, Idaho, Indiana, Iowa, Kansas, Kentucky, Mississippi, Missouri, Montana, North Carolina, North Dakota, Ohio, Oklahoma, Pennsylvania, South Carolina, South Dakota, Texas, Utah, Washington D.C. West Virginia, Wisconsin, Wyoming

Mployer Advisor’s Take

While there are a few potential advantages to non-consolidated PTO, many of those advantages in terms of shaping employee PTO usage are often more theoretical than practical, whereas the additional burdens of verifying and administering non-consolidated PTO are very concrete.

Though non-consolidated PTO remains the majority position for the time being at least, all the momentum seems to be behind consolidation.

Whether that momentum will ultimately carry the unlimited leave model and its even greater levels of flexibility to become standard business practice and the majority approach among employers remains to be seen, but unlimited PTO certainly seems to have the necessary tailwinds behind it to make that outcome a real possibility.

Despite the practical downsides for employees with unlimited PTO - which employees will adapt to over time and which employers can mitigate through proactive efforts to help encourage culture shift and encourage optimized leave utilization - the idealized promise of unlimited PTO remains a strong draw for talent from a recruitment and retention perspective.

Further, employers would be ill advised not to consider the potential benefits that can be immediately realized from a liability perspective when the policy is implemented, especially if they operate in a state that considers accrued PTO to be equivalent to wages and/or mandates the payout of accrued PTO to employees that have been fired.

The right PTO arrangement may very well be a little different for any given employer based on what they do, where they are, and what they hope to accomplish via the policy, but consolidation and unlimited PTO offerings are clearly not only attracting the interest of a growing number of employers, but many of those employers who take a closer look are liking what they see and making a change.

Economy
The Employment Situation for May 2024
The latest economic release from the Bureau of Labor Statistics reports that the U.S. added 175 thousand new jobs last month, while the unemployment rate ticked up to 3.9%.
May 3, 2024

Editor's Note: This report is based on survey data from April 2024 that was published in May 2024. This is the most recent data available. (Source: Bureau of Labor Statistics)

The US job market underperformed expectations for new job creation last month, adding only 175 thousand new jobs relative to the 240 thousand jobs that economists had predicted.

Further, while the unemployment rate increased slightly to 3.9%, the actual month-to-month change was even smaller than it seems and was amplified by the customary rounding of the headline figure to one decimal place.

While we have at many times touted the now 27 consecutive months that the unemployment rate has been below 4%, which represents a historically low rate maintained for a historically long time, a perhaps comparably impressive figure that is emerging is the 9 months in a row that the unemployment rate has rounded to within one-tenth of a percent of 3.8%, which is impressively consistent, a well.

The healthcare industry recorded the largest number of new jobs last month, at 56 thousand, which is down slightly from an average of 63 thousand each of the last 12 months, while the social assistance industry grew by 31 thousand jobs - almost 50% higher than the average 21 thousand social assistance jobs added each month over the last year.

The retail and transportation & warehousing industries both added about 20 thousand jobs, while construction and government payroll entries grew by about 8,500 jobs apiece.

There was no meaningful change in jobs figures across the other major industries last month, including non-farm natural resource extraction industries, manufacturing, wholesale, information, financial services, professional & business services, and other services. 

And it may be worth highlighting that while there was no significant change in leisure and hospitality employment figures last month, revisions from previously reported figures indicate that the leisure and hospitality has not yet in fact returned to pre-pandemic employment levels, so that milestone awaits ahead yet contrary to earlier reporting.

The average workweek also decreased by 6 minutes to 34.3 hours per week last month while average hourly pay rose by two-tenths of a percentage point (or 7 cents) to $34.75 per hour. For private-sector non-supervisor employees, hourly pay rose last month by 6 cents per hour, up to $29.83.

Mployer Advisor’s Take

Headlines may largely emphasize that job additions didn’t meet expectations, but it is important to consider those expectations in light of the relevant (and relative) context.

Relative to the approximate 220 thousand jobs added each month on average throughout 2023, for example, the jobs numbers recorded last month are a bit down. 

Relative to the more than 400 thousand jobs that the US economy added each month in 2022, however, the 175 thousand jobs added last month look a whole lot worse.

Compared to the fewer than average 170 thousand jobs added each month in 2019 before the pandemic set in, however, or the 125 thousand new jobs added to the US economy on average each month for the 80 years before that - then last month’s 175 thousand new jobs starts to look a lot better. 

Expectations and outcomes can have a funny relationship like that, which is mirrored in some of the market behavior we’ve seen recently. 

When inflation numbers crept up again as of the most recent data, for example, the Federal Reserve not only chose to forego rate cuts at its latest gathering, but Fed leadership also took the opportunity to tamp down much hope for rate cuts at all in 2024, and the markets slumped as a result. Today, on the other hand, when the job additions failed to meet expectations, the markets again surged.

Relativity aside, whether the job market continues to soften over the next couple months remains to be seen, of course, but with job openings currently at their low point over the last 3 years and with no interest rate relief in sight, a continued softening certainly seems more likely than not.

At this point, however, consistency remains the most noteworthy and supportable trend in the data, and it is important to not lose sight of the fact that the job report remains significantly stronger than average, even if fewer jobs were added than expected.

Check out the Mployer Advisor blog here.

Compliance & Policy
Legal/Compliance Roundup - April 2024
‍Each month, Mployer Advisor collects and presents some of the most relevant and most pressing recent changes in law, compliance, and policy in areas related to employee benefits, health care, and human resources. 
April 26, 2024

Each month, Mployer Advisor collects and presents some of the most relevant and most pressing recent changes in law, compliance, and policy in areas related to employee benefits, health care, and human resources. 

2023 EEO-1 Component 1 Submissions Due Date Set

Collection of EE0-1 Component 1 data will open on April 30, 2024 - with a final deadline for EEO-1 Component 1 submissions currently set for June 4, 2024.

Check the Equal Opportunity Employment Commission (EEOC) website for updates as well as an instruction booklet and file submission specifications, which the EEOC expects to have posted by March 19, 2024. 

This filing must be submitted by every company that has 100 or more employees across all locations and/or is affiliated with a company that has 100 or more employees through common ownership or centralized management. 

Further, this filing must also be submitted by any company with 50 employees or more that has a contract with the federal government worth at least $50,000 or has an establishment that holds a federal contract worth at least $50,000. 

Companies or establishments thereof that are federal contractors and serve as depositories of federal funds no matter how much or how little, as well as financial entities that are issuing and paying agents for US Savings Bonds and Savings notes must also submit this form. 

Updates regarding the timely, etc. will be posted here on the EEO-1 website.

New Notice Requirements For (Re-)Enrolling Certain Policies

A new federal rule addressing short-term limited duration insurance and independent non-coordinated benefits like fixed indemnity and specific-disease or illness policies was published on April 3, 2024. 

The new rule is the result of a joint effort between several federal agencies and includes a requirement that the first page of any materials marketing application enrollment and re-enrollment must include notice to potential and current policyholders that the policy does not provide comprehensive benefits. 

This notice requirement takes effect for applicable policies issued or renewed after January 1, 2025. 

You can find that new rule here

Supreme Court Sides With Employee In Title VII Discrimination Interpretation

The case at issue involved a male employee replacing a female employee who was transferred to a new department where her pay and title remained the same but her scope of duties, schedule, and some job perks did not.

The Court held that a job transfer did not need to have caused ‘significant’ harm to an employee in order for the employer to have violated Title VII.

A customizable example notice is provided in the rule as well to assist employers with compliance, although regulators intend to supplement that example with a template notice that would require no customization on the part of employers in order to satisfy the rule. 

Federal Prescription Data Reporting Updates

RxDC reports for calendar year 2023 are due June 3, 2024 in accordance with the Title II, Division BB of the Consolidated Appropriations Act of 2021.

While this information is usually submitted by carriers, pharmacy benefits managers, and third party admins - these entities will often need to seek out information directly from employers and can be expected to do so as the submission deadline approaches.

Some of the noteworthy updates to this year’s submission instructions include:

  • Clarification that nutritional supplements,over-the-counter medication, and medical devices are not to be included on lists of prescription drugs;
  • Simplification of the total monthly premium calculation, now computed by dividing the total annual premium by twelve;
  • Simplification of premiums calculation accounting for paid claims instead of incurred claims;
  • Addition of a new column to input enrollment data; and
  • Instructions on how to submit large data files that exceed the maximum allowable limit, as well as updated instructions on how to input various other data;

Click here for the Centers for Medicare and Medicaid Services 2023 instruction guide for RxDC submissions.

Pregnant Workers Fairness Act Update

The final regulations in support of the Pregnant Workers Fairness Act (PWFA) have been published and go into effect on June 18, 2024.

Some of the accommodations that the final rule presumes to be reasonable absent an especially significant justification for denying the accommodation, including allowing pregnant employees to: 

  • Take breaks to eat and drink;
  • Keep water nearby;
  • Use the restroom as needed; and
  • Sit or stand as needed

The rule also places a number of limitations for when employers can require supporting documentation in order for employees to request or receive accommodations under the rule, allowing employers to request such documentation only when it is reasonable under the circumstances.

The final rule also requires accommodations for medical appointments, and defines certain terms broadly enough to require accommodations for medical care involving fertility, contraception, and situations when pregnancies abruptly end whether willfully or not. 

You can find the final rule here.

Workforce Management
Employee Compensation Cost Breakdown - Wages, Salaries & Employee Benefits by Industry and Occupation
The average US employee costs their employer about $45.42 per hour in total compensation expenses with a little more than 30% of that expense going toward employee benefits and perks.
Author:
April 22, 2024

The average US employee costs their employer about $45.42 per hour in total compensation expenses, excluding members of the armed forces. A little less than 70% ($31.29) of that total compensation was earned in salary and/or wages while a little more than 30% ($14.13) of that expense covered employee benefits and perks according to the BLS.

Benefits and perks cross a number of segments. Below is the full breakdown but as you can imagine, the majority comes from medical, social security, leave, and retirement. While life, disability, dental and vision are all important, the only represent a small percentage of the full medical.

Employers each year invest over $1T into their employee's benefits, this is over 5% of the US GDP. Your firm does the same, employee benefits are often one of the top five expenses each year for an employer, in some industries it is in the top three.

Going one level deeper, the average hourly wage/salary costs were nearly identical between service employees and goods producing employees at $30.34 and $30.31 hours, respectively, whereas the average hourly employee benefits expense was a couple dollars higher for goods-producing employees at $14.44 an hour per employee than for service employees at $12.44 an hour per employee.

Expenses derived from leave, however, whether paid time off or sick leave, were slightly higher for the service industries at $3.34 per hour relative to the $2.82 per hour average leave expense for employees in industries that produce goods.

Employee Compensation Costs by Industry

First, lets take a look by industry. As the following chart illustrates, the information industry had both the largest wage/salary expense at $48.25 per hour and the largest employee benefits expense at $26.60 per hour, for an average total compensation expense of $74.85 per employee per hour.

Despite paying a slightly lower average wage/salary expenses per employee at $47.95 than the information industry’s $48.25, the utilities industry nonetheless has the highest average hourly total employee compensation expense at $76.91 as a result of boasting the largest average hourly employee benefits expense of $28.96.

The other services industry had the lowest average total employee compensation costs of just $17.82, followed by leisure and hospitality at $19.44, and the retail industry at $25.08 before making the jump up to the manufacturing industry, which spends an average of $43.68 on employee compensation per hour.

Interestingly, despite paying the lowest wages and salaries, the other services, leisure and hospitality, and retail industries pay the largest proportion of total employee compensation in the form of wages and salaries. In short, the pay is relatively bad in these industries and the benefits are even relatively worse.

Employee Benefit Expense Breakdown

As noted above, the split between wages/salary expenses and employee benefits expenses was about 70% to 30%.

The 30% of total employee compensation expenses that went toward employee benefits can be further broken down, the largest portion of which went to health insurance of course, which cost private employers about $2.94 per hour per employee on average.

Social Security contributions were the next largest expense at $2.06 per employee per hour, followed by paid leave at $1.67, non-production bonuses at $1.20, and defined contribution benefits which cost employers an average of $1.07 per employee per hour in 2023.

Those 5 employee benefit expenses alone (totally $8.97 per employee/hour) accounted for more than 70% of the average total hourly employee compensation expense of $12.77 per hour.

The least expensive eight benefits expenditures combined to equal a little more than $1 in total cost per employee per hour, or a bit over 8% of the total average employee benefits expense.

While the list stacks up for the minor benefit offerings, with a negligible impact on cost. some of them are the most important to certain segments of employees. As noted above, the split between wages/salary expenses and employee benefits expenses was about 70% to 30%.

Employee Compensation Costs by Occupation Type

Next, lets look at the specific occupation. While workers in private industry cost their employers $43.11 per hour in total compensation expenses, those figures unsurprisingly varied quite significantly based on occupation type.

Management, business, and financial occupations had the highest average hourly compensation costs at $81.72, followed by professional and related occupations at $66.53.

Construction, fishing, farming, and forestry employees cost their employers an average of about $44.50 per hour in compensation expenses, while sales, transportation, and office and administrative employees had an average compensation expense of about $33 per hour. Service industry employees came in at the bottom of the list costing just $21.55 per hour in total compensation.

It is worth noting that the benefits expenses incurred for sales employees is surpassed by all other occupations outside service occupations, and although sales occupations pay higher wages and salaries than transportation and office/administrative jobs, transportation and office/administrative jobs are nonetheless more expensive in total compensation because of their relatively more substantial benefits offerings.

Employee Compensation Costs by Industry & Occupation

When accounting for both industry and occupation type at the same time, the combined effect that these independent factors have on average employee compensation expenses can be seen even more clearly, as in the following charts outlining employee compensation costs by industry, further broken down by occupation type.

For example, management, business, and financial jobs in the professional and business services industry cost their employers ($89.79 per hour) more than $12 more an hour in total compensation expenses than employees in the same field that work in the manufacturing industry ($77.56 per hour).

On the other hand, office and administrative support jobs compensation expenses were slightly more expensive in the manufacturing industry, albeit largely consistent across industries - $34.4 per hour in the manufacturing industry, $32.31 in the professional and business services industry, and $32.38 per hour in the trade, transportation, and utilities industries.

In a future installment, we’ll take a look at how these employee compensation expenses also vary by company size and region as well as how occupation and employee headcount combine to affect average hourly employee compensation cost.

Economy
The Market Employment Summary for April 2024
Each month, Mployer Advisor breaks down the Bureau of Labor Statistics’ most recent State Employment and Unemployment Summary to highlight some employment trends across various markets. This is an overview of April’s report. 
April 19, 2024

Editor's Note: This report is based on survey data from March 2024 that was published in April 2024. This is the most recent data available. (Source: Bureau of Labor Statistics)

The national unemployment rate average fell by one-tenth of a point last month, as US employers added more than 300 thousand new jobs.

Only 6 states recorded a statistically meaningful reduction in unemployment rate, however, led by Arizona at minus 0.3%. 

Florida was the only state to register an increase in unemployment last month, while the remaining 43 states and Washington DC saw no meaningful change in their month-to-month unemployment figures. 

Similarly, only 5 states saw a net increase in jobs over the month, led by Virginia which added almost 17 thousand new entries to in-state payrolls, while the remaining 45 states and DC essentially held steady on net.

There are 5 states plus Washington DC that have unemployment rates above the US national average, down from 6 such states last month plus DC, while 24 states boast unemployment rates below the national average.

Below is the breakdown of the Bureau of Labor Statistics’ (BLS) market employment summary for April 2024.

States With the Highest Unemployment Rates

California posted the highest unemployment rate for the second month in a row, holding steady at 5.3%, followed by Washington DC which ticked up a tenth of a point to 5.2% and swapping places with Nevada who ticked down a tenth of a point to 5.1%.

Rounding out the only other states with unemployment rates higher than the US average are Illinois, New Jersey, and Washington state - which each came in at 3.8% unemployment last month.

Florida, which saw its unemployment rate go up by one-tenth of a point, was the only state to record a statistically significant increase in unemployment last month.

Over the past 12 months, 29 states have recorded meaningful increases in unemployment, led by Rhode Island at plus 1.3%, followed by Connecticut at plus 1.1%, which were the only states that saw their unemployment rates increase by 1% or more over the year.

States With The Lowest Unemployment Rates

For the third straight month, North Dakota and South Dakota recorded the lowest unemployment rates among the states, both holding steady over the month at 2.0% and 2.1%, respectively.

Vermont was next on the list at 2.2% unemployment, followed by Maryland and Nebraska at 2.5% each.

Of the 6 states that recorded a net drop in unemployment rate last month, all but Arizona at minus 0.3% recorded a reduction of just one-tenth of a point. Those states are Maine, Montana, New York, Vermont, and Virginia. 

Massachusetts saw its unemployment rate decrease by one-tenth of a percent over the course of the last 12 months, and it was in fact the only state to record a net decrease in unemployment over that time frame.

States With New Job Losses

No states saw statistically significant job losses last month.

States With New Job Gains

5 states in total saw the total number of jobs being worked in their states increase last month.

As a percentage, Arkansas and Kentucky saw the largest job gains at plus half a percentage point each, while Kansas and Virginia both registered 0.4% increases, rounded out by the 0.3% increase in Georgia.

Looking at the raw number of jobs added, however, Virginia had the biggest month, growing their in-state payrolls by 16,500. For context, that’s 10 thousand more jobs over the month than what Arkansas added. 

Over the last 12 months, Idaho has seen the largest jobs gain in terms of percentage, with a 3.7% increase in payroll entries over the past year. Nevada isn’t far behind with a 3.4% increase over the same time period. 

Mployer Advisor’s Take: 

On the one hand, annualized inflation of 3.5% - as was recorded last month - is lower than inflation has been in all but 6 months out of the past 3 years.

On the other hand, inflation has ticked upward (albeit slightly) now 3 out of the last 4 months. 

The latter trend is what Fed head Jerome Powell is pointing to while signaling that they will likely be delaying the planned interest rate decreases until 2025.

Perhaps even more concerning, Powell indicated that the Fed’s analysis shows that the cause of the lingering inflation may be linked to the increasing difficulty of insuring an economy that is being subjected to increasingly volatile forces, particularly with regard to natural disasters and weather related events.

We will dive further into the new outlook on how uninsurability may be driving inflation in future pieces and what it means, but suffice it to say for now, given the potential scope of the problem that Powell believes has prevented inflation from being tamped out thus far, plans for lower interest rates may as well be on hold indefinitely.

Looking for more exclusive content? Check out the Mployer Advisor blog.

Economy
The Employment Situation for April 2024
The latest economic release from the Bureau of Labor Statistics reports that the U.S. added 303 thousand new jobs last month, while the unemployment rate ticked down to 3.8%.
April 5, 2024

Editor's Note: This report is based on survey data from March 2024 that was published in April 2024. This is the most recent data available. (Source: Bureau of Labor Statistics)

US employers had another banner month on the hiring front, adding 303 thousand new jobs, while the unemployment rate ticked back down a tenth of a point to 3.8%.

Not only did these job figures exceed expectations, they did so by more than 50% over the approximate 200 thousand jobs that economists were forecasting. 

It’s also worth noting that this report marks the 26th consecutive report with the US average unemployment rate below 4% - which is the longest such streak in nearly half a century.

The healthcare industry saw the largest number of new jobs added last month, with 72 thousand new payroll entries, which is a 20% increase over the 60 thousand new jobs the healthcare industry has averaged over the last 12 months. 

Government jobs had the next largest increase adding 71 thousand new jobs, which was up by more than 30% above its 54 thousand average monthly job additions.

The construction industry also added a significant number of jobs at plus 39 thousand, which is more than two times its monthly average - a trend that was matched by the other services industry, which added 16 thousand jobs last month, doubling the monthly average it has recorded over the past year.

While the social assistance industry saw growth as well, the pace was much slower than usual with the addition of just 9 thousand new jobs last month relative to its monthly average of 22 thousand. 

Perhaps most noteworthy of all the industries that recorded job growth last month, however, is the leisure & hospitality industry, which added 49 thousand jobs last month, beating its 12 month average of 37 thousand, and now finally fully recouping all the jobs the industry lost during the peak of the initial pandemic -4 years in h making.

There was no significant change in employment figures last month in the manufacturing, wholesale, transportation & warehousing, information, finance, professional & business services, mining, natural gas extraction, and quarrying industries.

Average hourly earnings rose by 12 cents to $34.69 last month, which is an increase of three-tenths of a percent. When accounting only for private sector, non-supervisory employees, however, the increase was only 7 cents per hour, bringing the average hourly earnings for this subset of the workforce up to $29.79.

The average workweek increased by one-tenth of an hour to 34.4 hours per week.

Mployer Advisor’s Take

Despite this significant job growth including a net upward revision of more than 20 thousand more jobs than were previously reported in January and February, the wage growth remains relatively slow and stable, which will help keep at bay some of concerns about what these strong economic reports will mean for the interest rate cuts that are expected before the end of the year.

This kind of dynamic of job growth without the corresponding wage growth is only possible because of the entrance (or reentrance) into the job market of more than 400 thousand people last month, bringing the labor participation rate up two-tenths of a point to 62.7%.

Still, the strength of this report undoubtedly increases the likelihood that the three interest rate cuts that the Federal Reserve has penciled in for 2024 will fall in the second half of the year, and any similarly strong reports that come over the next few months may very well push at least one of those cuts into 2025. 

With prices increasing by a very historically reasonable 3.2% (albeit still above the Fed’s target of 2%) as of the most recent data available, continued strong job growth is a lot more likely to delay and/or decrease the forthcoming rate cuts than another flare up in inflation seems to be, which is a pretty great place for this economy to be in, all things considered

Eager for more exclusive content? Check out the Mployer Advisor blog here.

Market Insights
Living Wage vs. Minimum Wage In The Modern Age
While the concept of a living wage has become an issue of increasing importance to both employers and employees in recent years, the number of workers actually earning a living wage has been steadily decreasing at the same time - though that decrease has not been experienced across industries and/or geographies in equal measure.
April 1, 2024

While the concept of a living wage has become an issue of increasing importance to both employers and employees in recent years, the number of workers actually earning a living wage has been steadily decreasing at the same time - though that decrease has not been experienced across industries and/or geographies in equal measure.

It may once have been easy to confuse minimum wage standards with living wage standards. In fact, the federal minimum wage was initially devised in part to ensure a living wage, those standards long ago diverged with cost of living significantly outpacing minimum wage increases on balance since the 1950s.

That said, the chasm between minimum wage and living wage seems to have become all the more stark in recent years, especially during the pandemic recovery when workers paid well above minimum wage found themselves unable to keep up as cost of living climbed faster than rising wages despite (and because of?) the historically labor-friendly labor market. 

Inflation has largely been under control for the better part of a year now, with the last 9 months holding steady below 4% annualized, but cost of living remains high and the minimum wage remains exactly where it has been for the last 15 years - 7 dollars and 25 cents an hour.

That $7.25 an hour in 2009 would be worth $10.58 today accounting for inflation, etc. Meanwhile, as of 2022, the average living wage in the US according to MIT was just over $25 dollars an hour at the time, or $27.53 in today’s dollars. 

With more workers than ever failing to secure a living wage, the repercussions of this situation are likely to be felt far beyond those who are personally affected, though not all industries are contributing equally to the issue nor are all cities/states/regions responding passively to the growing problem.

Industries With the Highest Living Wages

According to data from Revelio Labs, more than one third of workers (36%) employed by the top one thousand companies in the US are paid less than a living wage, defined here as a wage sufficient for two full-time workers to support themselves as well as two dependents. Even worse, nearly 1 out of 5 of those employees (19.2%) does not make enough money to meet basic needs. 

As the following graphic illustrates, among the 10 largest industries in terms of total number of employees (which collectively account for 10% of the US workforce), the industries involving technology development dominate the upper end of the scale, with the software, computer services, technology hardware, and pharmaceuticals/biotech industries all paying more than 80% of their employees at or above the living wage threshold.

On the other extreme, both the restaurant and leisure as well as the retail industries pay living wages to fewer than 40% of their employees, while the commercial support services, medical equipment, banking, and industrial goods industries all pay living wages to about 70% to 80% of their employees. 

Even when taking into account geographic variance in cost of living, the big picture doesn’t change much, although the following graphic seems to indicate a somewhat less favorable view of the tech industry’s propensity toward paying living wages when factoring for local cost of living, with the total percentage of employees that are paid a living wage in the software and pharmaceuticals/biotech industries dropping by between 3% and 4%, respectively.

Mostly, however, the information best illustrated by this graphic may simply be that industries like tech and media tend to gravitate toward areas with a relatively higher cost of living while the more industrial industries tend to be located in areas with a relatively lower cost of living compared to the national average.

Minimum Wage Across States

According to the National Conference of State Legislatures, Washington DC currently has the highest minimum wage among ‘states’ at $17 per hour, followed by Washington state at $16.26, then California and New York at $16 each. 

Beyond the 5 states that have no internally legislated minimum wage and are therefore subject only to the federal minimum wage standard (Alabama, Louisiana, Mississippi, South Carolina, Tennessee), there are 15 states that have set their minimum wage to the current federal level of $7.25 per hour - Georgia, Idaho, Indiana, Iowa, Kansas, Kentucky, New Hampshire, North Carolina, North Dakota, Oklahoma, Pennsylvania, Texas, Utah, Wisconsin, and Wyoming. 

Average minimum wage across the remaining states is about $13 per hour.

Minimum Wage Increases Coming Soon

There are 9 states that currently have enacted increases to their current minimum wage thresholds that have not been enacted yet:

  • Delaware: Increase of $1.75 from $13.25 to $15 effective January 1, 2025
  • Florida: A series of three minimum wage increases of $1 each are set to occur on September 30th of each of the next three years, raising the statewide minimum wage from $12 up to $15 by October 1, 2026.
  • Hawaii: 2 minimum wage increases are currently planned, raising the current minimum wage of $14 per hour up to $16 per hour effective on January 1, 2026 followed by another $2 increase up to $18 per hour two years later, effective on January 1, 2028.
  • Illinois: $1 increase from $14 per hour up to $15 per hour effective on January 1, 2025.
  • Michigan: Annual rate hikes are planned for January 1 of each of the next 6 years, increasing the statewide minimum wage from $10.33 per hour up to $12.05 by 2031.
  • Nebraska: 2 minimum wage increases of $1.50 each are currently planned to take effect on January 1 of 2025 and 2026, respectively, increasing the current minimum wage from $12 to $15.
  • Nevada: On July 1 of 2024, Nevada’s minimum wage will climb from $11.25 to $12.
  • Rhode Island: The minimum wage is set to increase by $1 per hour on January 1, 2025, bringing the pay rate up from $14 per hour to $15.
  • Virginia: 2 minimum wage increases of $1.50 each are currently planned to take effect on January 1 of 2025 and 2026, respectively, increasing the current minimum wage from $12 to $15.

What Comes Next?

It’s been almost 12 years since fast food workers launched the Fight for 15 movement to push for better pay (specifically $15 per hour) as well as better/safer working conditions. Currently, the US average living wage is about $27 per hour - nearly double the lofty (and obviously unachieved) goal that $15 per hour represented little more than a decade ago.

In the 85 years since the federal minimum wage was first introduced, it has been raised at least 23 times - most recently in 2009 - with an increase on average more than once every 4 years, but never in the past had more than 10 years passed in between increases, which makes the current 12 year pause all the more noteworthy. Perhaps even more concerning is that the previous record gap between federal minimum wage threshold increases was between 1997 and 2007, which indicates a troubling trend.

Some states are evidently trying to take up the mantle in lieu of waiting for further federal action, but even among the states with the highest planned minimum wages, those thresholds fall significantly short of the living wage standard.

It is also worth noting that all of the states that currently have minimum wage increases set on the books also already have a statewide minimum wage threshold that is meaningfully higher than the current federal standard. 

With 40% of states effectively mirroring the federal minimum wage standard, this problem will likely only worsen in the near term and become exacerbated on a regional basis, until some kind of federal solution is enacted.

Still, whenever Congress eventually gets around to increasing the federal minimum wage again, based on current conditions there is virtually zero chance that the increase will close much of let alone all of the gap between the minimum wage and living wage in a given area. 

Of course, failure to raise minimum wage standards to meet base standard of living expectations does no preclude other factors and/or market forces from reversing the trend toward larger proportions of the workforce earning unlivable wages, but whatever those factors may be they have yet to emerge, and the long-term implications of these conditions remain unclear.