RECENT POSTS
Wednesday, February 13, 2019
Low Latency Calcbench

Monday, February 11, 2019
Now Streaming on Hulu: Red Ink

Thursday, February 7, 2019
Early Look at 2018 Tax Decline

Wednesday, February 6, 2019
You Revised WHAT, Netflix?

Thursday, January 31, 2019
Talking About Huawei Exposure

Wednesday, January 30, 2019
Another Discrepancy in Reported Numbers

Wednesday, January 30, 2019
Finding Revised Facts: Hertz Edition

Wednesday, January 23, 2019
GE Commercial Aviation Services: Bringing Numbers to Light

Monday, January 21, 2019
Differences in Earnings Releases and 10-Ks

Wednesday, January 16, 2019
The Importance of Textual Analysis

Tuesday, January 8, 2019
A Look at Climate Change Disclosures

Wednesday, January 2, 2019
Quants: Point-in-Time Data for Backtesting

Friday, December 28, 2018
Now Showing: Controls & Procedures

Thursday, December 27, 2018
A Reminder on Non-GAAP Reporting Rules

Monday, December 17, 2018
Researching PG&E’s Wildfire Risk

Wednesday, December 12, 2018
Tracking Brexit Disclosures

Thursday, December 6, 2018
Campbell Soup: Looking Behind the Label

Sunday, December 2, 2018
SEC Comment Letters: The Amazon Example

Wednesday, November 28, 2018
Measuring Big Pharma’s Chemical Dependency

Monday, November 26, 2018
Analysts, Can You Relate? A True Story

Archive  |  Search:

The Labor Department released its latest jobs report this morning, and the report for November was the usual: respectable number of jobs created (228,000), unemployment rate holding low and steady (4.1 percent nationally), and growth in wages slow-poking along—only 2.5 percent higher than November 2016.

On the other hand, when you look at companies’ cost of labor, a different story emerges. Calcbench took a peek, and found that so far this decade, labor costs are far outpacing the rate of inflation.

We started by looking at the Selling, General & Administrative line-item for the S&P 500. SG&A costs aren’t a precise metric for labor costs, but they are a reliable barometer. For example, the salary costs of all non-sales personnel roll into “general and administrative.” Commissions a company might pay fall under “sales.” So labor costs are in SG&A, and many other items that roll into SG&A include their own labor costs as well. (Say, shipping fees, which are partly determined by the labor costs your shipping agent has.)

With our Data Query Tool, we pulled SG&A costs for the S&P 500 from the start of 2010 through third-quarter 2017. Then we calculated the incremental increase in SG&A costs (with first-quarter 2010 equaled 1.o) and mapped that to inflation over the same period as determined by the Consumer Price Index.

We got this:

As you can see, SG&A costs (in blue) are increasing at a pace well above inflation. A dollar’s worth of goods in 2010, indexed for inflation, now costs roughly $1.13. But a dollar’s worth of SG&A costs in 2010 now costs $1.32.

Why aren’t wages keeping up with labor costs? That’s an economic question that hinges on the available supply of labor, the types of labor provided (high-skilled labor costs more), and other factors, all of which are beyond the scope of this post.

Suffice to say, however, that the next time you see a CEO complaining on Bloomberg or CNBC that the costs of labor are his or her biggest concern— that CEO isn’t wrong. Labor costs are going way, way up.


FREE Calcbench Premium
Two Week Trial

Research Financial & Accounting Data Like Never Before. More features and try our Excel add-in. Sign up now to try the Premium Suite.