The numbers: American workers are finally reaping the benefits of the lowest unemployment rate and best jobs market in decades: Wages and benefits are rising at the fastest pace in a decade.

The employment cost index rose 0.6% in the second quarter, a tick below the MarketWatch estimate of 0.7%.

More important, the cost of worker compensation in the form of pay and benefits edged up to 2.8% to mark the biggest yearly gain since mid-2008.

In other words, workers are making out better.

What happened: Wages — some 70% of employment costs — rose a sturdy 0.5% in the second quarter, the government said Tuesday.

The big increase was in benefits: They jumped 0.9% to mark the largest advance in four years.

Employees in the private sector are faring better than those in government, the ECI data showed.

The ECI reflects how much companies, governments and nonprofit institutions pay employees in wages and benefits.

Big picture: Wages and compensation are going up because unemployment is way down. The jobless rate has tumbled to an 18-year low of 4% after the hiring of millions of people in the past eight years.

More and more companies complain they cannot find enough skilled workers. Firms have sought to fill openings by offering better benefits such as more vacation time or flexible hours. When push comes to shove, they are offering higher pay.

While bigger paychecks are great for workers, the Federal Reserve is watching closely to see if rising compensation is stoking inflation. The Fed could jack up U.S. interest rates if it becomes a big worry, but so far inflation remains relatively mild.

What they are saying? “For now, the headline is that the rate of increase of labor costs is no threat to inflation, but that won’t stop the Fed hiking in both September and December,” said chief economist Ian Shepherdson of Pantheon Macroeconomics.

Market reaction: The Dow Jones Industrial Average DJIA, +0.19% and the S&P 500 SPX, +0.29% were set to open slightly higher in Tuesday trades. The stock market has rallied in a big way over the past two weeks, but prices gave way on Monday.