"It's Trump's Fault" - US Employers Cut Bonuses For First Time In 7 Years

As stagnant wages and rising tuition and medical costs squeeze middle class families, Bloomberg reports that US employers cut employee bonuses this year for the first time in seven years, further straining household budgets despite an ostensibly bright economic outlook. Bonuses slipped a tenth of a percentage point to 12.7% of total compensation this year, according to data from Aon Hewitt, which conducts an annual survey of more than 1,000 employers.

Aon said that while the move may not be dramatic, it's confusing considering the relatively healthy state of the economy. What's more worrying is that the cuts come as part of a broader retrenchment.

“It’s not a dramatic change, but it is counterintuitive,” said Ken Abosch, who heads compensation at Aon Hewitt.

 

“What’s even more surprising and alarming is that organizations are pulling back their projected spending in 2018,” he added. Companies expect to spend 12.5% of total compensation on bonuses next year, the survey found.

And in the spirit of “the buck stops here,” employers are blaming President Trump for the cuts, explaining that the uncertainty surrounding policies from tax reform to health care is making long-term planning difficult. Fears of an imminent recession have also inspired some employers to pare back compensation spending, risking losing their most valuable employees in the process.

“Despite the strength of the economy, a tight job market, and strong corporate performance, employers have resisted raising wages out of fear of increasing their fixed costs. Those surveyed said they had given out, on average, 2.9 percent raises this year and expect to give around the same next year. The specter of a recession, or even just a bad year, has kept salary increases at that level for the last five years. “There’s just not any appetite to budge on salary spending,” said Abosch. In that kind of climate, the bonus is a much more alluring way to reward workers: It’s not permanent, so companies can choose to hand out bonuses during boom times or withhold them when budgets tighten. Workers who rely on their regular earnings to pay the bills would be justifiably angered by wage cuts, but they may not expect to get a bonus every year.”

And bonuses will likely continue to shrink this year. Ironically, Bloomberg says employers are claiming that Hurricanes Harvey and Irma are forcing them to be more conservative by increasing the chances that inflation could pick up and erode profits. Even after several investment banks warned that the storms could lead to a slight pickup in GDP by increasing construction costs.  

“This year, however, companies are skittish on bonuses, too. Their budgets aren’t tight, but they fear an economic downturn is on the horizon—and specifically, those surveyed said, that greater government spending on defense, infrastructure, and hurricane relief could boost inflation and hurt corporate profits. “Organizations are expressing concerns about how all of that is going to get paid for,” said Abosch.”

Oh, and they’re blaming Congress, too.

“There’s something else giving employers pause on bonuses, too: “The accomplishments, or lack thereof, in terms of congressional results this year, and just some uncertainty about leadership in general out of Washington,” Abosch said. Congress has passed a $700 billion defense funding bill and a $15 billion in hurricane relief, but the passage of tax reform and health care legislation, two Republican priorities that would have a major impact on employers, is far from assured.”

US wages have been stagnant for years even as household wealth has ballooned to a record $96.2 trillion, according to the Fed’s latest flow of funds report."

Unfortunately, the benefits of this increase have largely accrued to the richest Americans, who own the majority of tradeable, and non-tradeable, assets in the US. According to the survey, virtually all of the rise in household net worth has only benefited a handful of the richest

Americans, with the top 10% of the wealth distribution holding 76% of all family wealth.

Because of this, the bonus cuts will almost certainly impact spending decisions made by middle class families, which could have economic ramifications for GDP, given the consumption-focused state of the US economy.

We wonder: With more cuts expected, whom will employers blame next to justify their “frugality”?

Our money’s on Putin.   
 

Comments

bankbob Sep 25, 2017 8:19 AM Permalink

My company had a record year.  So, senior management got much bigger bonuses. That meant less money was left over for middle management and employees, becausethey did not inflate the overall bonus budget to cover.

Catullus Sep 24, 2017 9:29 PM Permalink

My "variable pay" went from 10% to 25% over the past 9 years. Yeah. Here are my list of paycuts over the past 6 (I keep these on my desk):

No more pension. (Ended in 2012)
Tied 401k match to non-GAAP EPS
Match doesn't apply to commissions/bonus money
Took away 40 hours of sick time
Lowered PTO accruals
Lowered carryover PTO
HSA healthcare plan (I don't mind, but I'm wearing the risk now)

I've also noticed companies called it a "merit raise" for what used to be COLA. As you did such a great job, let's give you a raise that doesn't keep up with inflation.

Cthonic Catullus Sep 25, 2017 10:03 AM Permalink

That "merit raise" trick works wonders in the health care industry; most nurses and techs too young, financially naive, or innumerate to understand the need for COLA. Even with max merit raises in each of the intervening years, wife earns 10% less after tax in 2009 dollars than she did then, even with an additional eight years of experience, and that's before taking into consideration massive health insurance premium increases.

In reply to by Catullus

Rikky Sep 24, 2017 9:12 PM Permalink

economy doing great my butt my employer is cutting 15% of the workforce and also slashed bonuses by 15% across the board + purposely lowered performance scores to pay out less.  then the CEO has some town hall event telling us how much he loves the employees and all.  hyprocrites.

Moving and Grooving Rikky Sep 24, 2017 11:36 PM Permalink

I retired a few years ago, in large part because of the bullshit being shoveled onto the workers there. Just like described above, none of the workers got more than 2% raises for the last 10 years, no one was promoted either - all the moves became 'laterals' - no salary increases. Health insurance became onerous, plus they added all that healh measurement stuff and then started basing your insurance premiums on that. Fewer people, longer hours, extended travel, it went on and on. And, like you said, the jerks in charge kept handing out cookies and kool-aid while telling us how much they loved us. Assholes the lot. Hope they go bankrupt.  

In reply to by Rikky

Peak Finance Sep 24, 2017 8:01 PM Permalink

LOLZLying sacks of fucking shitSheep are dumb, but let's face it there not THAT dumb, they see record stock prices for their companies and business going crazy, but they get a shit bonus,  they will KNOW something is up.If anyone asks me, I am going to say their scumbag piece of shit corporate welfare sucking vampire employer is punishing them for voting Trump.

Justin Case dchang0 Sep 24, 2017 10:22 PM Permalink

people with no political connections and bargaining units. In stages the corporatocracy will increase the work week, cut over time, reduce benefits to zilch, no mat leave, no sick pay, workman's comp, training programs, no paid lunches, no sick leave/days paid, limited washroom breaks, etc. Just like the good'ol 20's. You'll kiss the ring of the owner each morning to keep yoar job. Asking for a raise is instand dismisal.

In reply to by dchang0

Albertarocks Sep 24, 2017 7:23 PM Permalink

"It's Trump's Fault" - US Employers Cut Bonuses For First Time In 7 YearsThis is so incredibly unfair, to blame President Trump when everybody on the planet knows it's the Russians' fault.  Because you know... that's the new religion.  Everything is the Russians' fault.

Clock Crasher Yen Cross Sep 24, 2017 7:25 PM Permalink

This will not stop until every stock, bond and piece of real estate is owned by the Fiat Ponzi Insurgency, their member banks and the Central Bank of the Corporation known as the United States. Once that's all transferred they are going to come for the remaining fiat with massive inflation.  That's when they force the People to sell off their children and daughters to the Illuminati Plague Storm for grand ole time. In the end it will be a battle to the death between the Police States of the United Banks of America and the 2nd Amendment.Bladerunning on a knifes edge.  Eternal tyranny or Renaissance.

In reply to by Yen Cross

junction Clock Crasher Sep 24, 2017 7:31 PM Permalink

No soup for you!Outside of sites like Zero Hedge, all the news you get is propaganda.  Trump now has as chief advisors three generals.  Easily available meth and opioids are wiping out a sizable portion of the population every year.  The drugs all come via protected transport routes run by the military and the CIA. The fact that the "cattle", the middle class, are getting no bonuses or raises is not surprising.  Things are just going to get worse. 

In reply to by Clock Crasher

fockewulf190 junction Sep 24, 2017 10:20 PM Permalink

"Outside of sites like Zero Hedge, all the news you get is propaganda."

Some of the news on this site is definitely pro-Russian propaganda. The articles from "anti-media", "strategic culture", and others, are all kremlin financed websites and which are dutifully, and routinely, reposted here at ZH forthwith. It's the rarest of days that you will read anything critical here about Russian foreign policy or domestic problems...unlike the truckloads of critical articles posted here which are against the US in both of those categories. I'm not saying there isn't legitimate criticism warranted on some issues, but the one-sidedness is indisputable....and flagrantly obvious.

ZH does it's best work when focusing and reporting on the worldwide problematic economic system, and especially the corruption and fraud within it.

In reply to by junction