Compensation, Benefit Costs Up Just 2.9% : Economy: Record low gain for past 12 months is good news for employers but indicative of employees’ struggle.

The most closely watched barometer of employee pay and benefits posted a record low gain of 2.9% over the past 12 months, the federal government reported Tuesday. A sharp slowing in employers’ cost increases for such benefits as health insurance and workers’ compensation--along with slim pay raises for workers--held down the government’s employment cost index.

Taking inflation into account, the government said, there was no gain at all in compensation costs over the 12-month period ended in March.

Analysts noted that the news is encouraging for employers and investors edgy about the ability of rising wages to ignite inflation throughout the economy.

At the same time, the report also signals the severe hardships civilian workers face in trying to get ahead financially. Analysts noted that workers normally chalk up their biggest gains in wages and benefits when unemployment is low.

Now that signs are emerging that the U.S. job market’s long recovery is starting to weaken, “it doesn’t look like workers are going to make up any ground,” said Dean Baker, an economist with the labor-supported think tank Economic Policy Institute.

He attributed the recent small increases in compensation to the concerns many workers have about whether they will be able to hold on to their jobs.

Even during times of rapid employment growth, Baker said, “people are still worried about job security, and they’re putting that ahead of wages and benefits.” In practical terms, he said, relatively few workers are willing to quit their jobs in hopes of landing higher-paying positions at other firms.

In addition, Baker said, many employers may be holding down their health insurance costs by dropping or reducing coverage for their workers. Benefit costs for private-industry workers rose 2.9% over the past 12 months, the same gain as in compensation costs overall, but down from a 3.7% increase in benefit expenses during calendar 1994.

U.S. Bureau of Labor Statistics economist Brenda K. Rogers said the slower rise in benefit costs might also reflect successes by employers in renewing their health and workers’ compensation insurance policies at better-than-anticipated prices.

Benefit costs also include employers’ expenses for state unemployment insurance, pensions and vacations.

The 2.9% rise in compensation costs for workers in private industry was the lowest since the government began tracking the figures in their current form in 1979. The previous record low, 3%, was achieved during the 1994 calendar year.

The index has been on a downward trend since hitting 5.5% at the end of 1989, amid the last economic boom.

While the index is generally considered the most reliable yardstick of compensation trends, analysts say it has shortcomings. For instance, it does not account for payroll reductions that come when companies lay off middle managers but hire lower-paid workers to fill other types of jobs. Some economists contend that such a phenomenon has been widespread.

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