BLS mulling whether to count stock options as part of emplyeee compensation. Note that the article below cites anecdotal evidence that relatively low level workers in tech companies are retiring in their TWENTIES AND THIRTIES on millions in stock option profits.
This says volumes about the insane levels this mania has reached.
U.S. mulls adding stock options to
inflation data
WASHINGTON, Jan 20 (Reuters) - The U.S.
government said on Thursday it is considering the
inclusion of stock options, a driving force behind
booming wealth in the world's richest economy, in a
major inflation indicator.
The Labour Department is mulling the addition of
stock options to its quarterly Employment Cost
Index report, which measures the pay and benefits
of U.S. workers, to more accurately capture the
changing face of the new economy.
The department's Bureau of Labour Statistics has
already completed a preliminary study on the issue and plans a
full-blown examination this year on how prevalent such stock options are
in the economy.
"We are conducting research on including stock options," BLS economist
Frances Harris told Reuters.
The ECI, a favoured report of Federal Reserve Chairman Alan Greenspan
who uses it to gauge inflation pressures, has often been criticised by
economists for not counting stock options.
Economists argue the data fails to capture the increasing wealth of a
growing number of American workers, whose company loyalty is often
paid for with lucrative stock options.
But Harris warned that it was unlikely that stock options, which give
employees the option to buy heavily discounted shares, could be included
in the index before 2002. She said BLS expects to complete its study on
how widespread the use of stock options are by the end of this year.
Once that information is in hand, the harder issue of how to gauge the
employers' cost of stock options needs to be considered before options
could be included in the ECI report.
"Based on the results of the prevalence study and a study on the cots of
options, BLS will consider whether to include options in the ECI," she
said.
Peter Kretzmer, senior economist at Banc of America LLC, said the
inclusion of options to the index would be a welcome addition to the ECI.
"When they resolve these issues it will be a step forward because the
increased reliance on options has made these measures less reliable
indicators of worker compensation," Kretzmer said. "It's a difficult
problem because it's difficult to value those options."
The payment of stock options, once a privilege only associated with
high-ranking company executives, has become increasingly common,
particularly with start-up technology companies who use them to entice
workers who might otherwise choose to work in a less risky environment.
Anecdotal reports of relatively low-level workers at companies such as
America Online Inc., Microsoft Corp. and others retiring in their late 20s
and early 30s on millions in profits realised from stock options have
become increasingly commonplace.
ASTOUNDING WEALTH
That wealth has been driven largely in recent years by Internet and
technology stocks which have soared in value at an astounding rate.
Kretzmer said the addition of options would help "reconcile the seeming
anomaly between very tight labour markets and rather slow increases in
compensation."
There have been few indications in recent months of wage inflation
despite an unemployment rate of just 4.1 percent -- the lowest level in a
generation and a level most economists had thought would spark wage
inflation.
More immediately, BLS is planned some minor tweaks to the ECI.
Effective in the June 2000 ECI report, to be released in late July, BLS will
include hiring and referral bonuses to the report as non-production
bonuses. BLS is also modifying its method of gathering data on retention
bonuses.
The addition of hiring bonuses could have a noticeable impact on the
report. Hiring, or signing bonuses have become increasingly common
because labour market tightness has made it harder for employers to
attract the workers they want.
The Commerce Department reported in recent months that union
contracts reached in October included $5.9 billion in signing bonuses on
an annualized basis, while in November union contracts signed in the
manufacturing industry alone included a further $1.6 billion in such
incentives.
Economists have a bevy of complaints about the ECI, a report know for
its quirks. For example, in tallying the ECI, the government takes an
average of wage gains in various occupations. But if a person moves from
a low-paid job to a higher-paid one, that is not counted as a wage rise.
The ECI counts wages, salaries and benefits but excludes overtime pay,
and shift differentials. It also includes commissions, incentive pay and
production bonuses. |
