As companies give bonuses, the prospect of pay gains still hazy

As companies give bonuses, the prospect of pay gains still

Photo: Chris O’Meara, Associated Press

JetBlue Airways ticket agents assist passengers in Tampa. The airline is among the companies providing bonuses.
JetBlue Airways ticket agents assist passengers in Tampa. The airline is among the companies providing bonuses.
Photo: Chris O’Meara, Associated Press

As companies give bonuses, the prospect of pay gains still hazy

WASHINGTON – American Airlines is handing out $ 1,000 bonuses to its employees. So are AT & T, Bank of America and Nationwide Insurance. The same for Comcast, JetBlue Airways and US Bancorp.

Such announcements, coming from dozens of companies, have followed the passage of the Republican tax plan that President Trump signed into law last month. The plan slashed the corporate tax rate from 35 to 21 percent. The companies say the bonuses they’ve announced to share some of their bounty with their workers.

The bonuses are one-time payouts, not the permanent pay raises that the Trump and Congressional Republicans will eventually result from the corporate tax cuts. Over time, bonuses are far less valuable to employees than wages increases.

With the exception of Walmart, most companies do not have any permanent payments. Economists caution that the corporate income tax cut’s effect on average pay, if any, might not become apparent for several years.

“As a worker, it’s great to get a one-off bonus, but that does not guarantee anything for the next year,” said Stephen Stanley, chief economist at Amherst Pierpont. “You’d rather have the raise, because next year you’re working off the higher base.”

Eventually, Stanley thinks the lower corporate tax rates will lead to pay raises. It expects companies over the next several years to use some of their windfalls to invest in equipment that would make them more productive and lead to higher wages.

Other economists remain skeptical that workers stand to receive sharp wage increases. They note that the corporate tax cut will overwhelmingly benefit shareholders and company owners. That sentiment is one reason stock market indexes are setting records almost daily.

“The bulk of the corporate tax cuts should be increased to people who hold stock in companies,” said Ethan Harris, chief economist at Bank of America Merrill Lynch. “Workers benefit much more from a cut in taxes on ordinary income. In other words, better to get a direct cut than a spillover from cuts to others. ”

Beyond the worker bonuses that have been advertised, typically for $ 1,000, have been stated to have their minimum wages. A handful of mostly small companies, including the Washington Federal Bank, have announced the largest increases in their workforces. And a few, including Visa and Aflac, have said they will pay their contributions to their retirement plans.

In addition, U.S. workers will begin to receive more home pay, likely by next month, as the Republican plan kick in.

The Communications Workers of America, a labor union, asked CEOs of large corporations to give workers $ 4,000 average income that White House officials said would eventually pay off from lower corporate taxes. AT & T, the first company to announce bonuses, said it thing the $ 1,000 bonus instead.

American Airlines, which also employs the communication union’s members, similarly decided to bestow a $ 1,000 bonus. The union said that it is important to note that the bonuses are “guaranteed that they are promised.”

The White House has all the announced bonuses that the corporate tax cut is benefiting workers, rather than just shareholders, and has dubbed the payouts to “Trump bonus.”

“Businesses across America have already started to raise wages,” said Trump said last week in Nashville.

The conservative group of Americans for Tax Reform, which has been compiled by the United States, has compiled a list of more than 100 companies.

Only a few have any broad-based pay increases. One Nephron Pharmaceuticals, from West Columbia, S.C. Nephron said it would give a 5 percent raise to most of its 640 employees.

Andrew Chamberlain, chief economist at Glassdoor.

“It’s a way for employers to be profitable,” Chamberlain said.

In some cases, they are sharing a sliver of their tax-cut windfalls. Bank of America’s bonuses will cost it roughly $ 145 million – only about 4 percent of the $ 3.5 billion that Goldman Sachs estimates will bank of America receive from the tax cut.

Likewise, KBW, an investment firm, estimates that Wells Fargo’s commitments to raise its minimum wage to $ 15 an hour and to boost its charitable contributions will equalize 5 percent of the additional benefits.

Most economists do not expect paychecks to start rising the rate of inflation. The unemployment rate is projected to fall further and could reach a five-decade low of 3.5 percent. They need to keep pace

Economists like Stanley, who expects the corporate tax cut to lift their wages over time, think it will be their way to the world.

“These things are not going to happen right away, but they will be coming into the next several years,” Stanley said.

Christopher Rugaber and Josh Boak are Associated Press writers.

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