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Hiring Is Still Low-Cost Proposition in Most Industries
Sluggish job market maintains chokehold on earnings growth

By Joseph Coombs  9/7/2012
 

“Good, but not great” is how most federal government employment reports are tagged each month when they’re released. But when it comes to workers’ earning power of late, “good” isn’t all that great.

A survey on worker displacement released Aug. 24, 2012, by the U.S. Bureau of Labor Statistics (BLS) shed more light on the trouble the U.S. faces getting people back to work. Since 1984, the Employment and Training Administration of the U.S. Department of Labor has sponsored surveys biennially that collect information on workers who were displaced from their jobs.

From January 2009 through December 2011, 6.1 million workers lost jobs that they had held for at least three years, according to the BLS. Of that group, 56 percent were re-employed by January 2012; 2.4 million of them were back in full-time jobs.

But many of those folks were not back at full strength. Only 46 percent of that group was earning as much or more in January 2012 as they did when they lost their job. About one-third reported earnings losses of 20 percent or more; the numbers were similar to those from a previous BLS survey taken in January 2010.

“These wage hits are substantial,” said Heidi Shierholz, an economist with the Washington, D.C.-based Economic Policy Institute. “It underscores the scarring that can happen due to job loss.”

Real average weekly earnings for all workers peaked in October 2010, the BLS reports, and have since fallen by 0.4 percent. Several surveys for 2013 indicate that U.S. companies are planning for median salary budget increases between 2.5 percent to 3.0 percent, but that could change if economic conditions worsen and employers tighten their spending.

The culprit, Shierholz said, continues to be weakened demand in the labor market.

“High rates of unemployment will always put downward pressure on wages,” she said. “The broader story is [that] layoffs are back to pre-recession levels, which is good news. But there’s still no hiring. So if you do get laid off, the consequences are much higher. The jobs just aren’t there right now.”

Between a Rock and Hard Place

HR professionals are often caught in the middle in this scenario, frequently having a tight salary range to work with when they are interviewing prospective job candidates. It’s not often that employment seekers will turn down a job for salary reasons in today’s depressed labor market. But it is happening in small pockets around the country, particularly among jobs that require advanced skill sets.

For example, Erika Mohler, a corporate recruiter for Jacksonville, Fla.-based defense contractor Logistic Services International, says some recent candidates have taken jobs with competitors who are offering more-attractive compensation packages. Mohler is frequently searching for candidates with high-level computer skills.

“We can negotiate to a point, but we’re often limited by the size of our [military] contract,” Mohler admits. “Some candidates take job overseas. It’s making it difficult to fill some of the jobs here [in the U.S.], but I also see it as a sign that the job market is getting healthier.”

At Colorado Springs Utilities in Colorado, HR employee Jonathan Liepe has a hand in the 200-plus jobs that get filled at the company every year. He says that during the past few years, candidates have declined the municipally owned utility’s offers for salary reasons in a broad array of job categories, including engineers and line technicians. Liepe is a senior HR specialist for talent acquisition, planning and rewards at the utility company.

“We do have people turning down jobs on occasion based on compensation,” Liepe wrote in an e-mail. “It’s not too often, but enough to be of concern.”

When the company cannot find an alternative candidate, Liepe said, the challenge is often connected to increased competition nationally. In the utility sector, national projections show that up to 60 percent of the labor force will be eligible for retirement in the next 10 years. Coupled with the fact that not enough students are pursuing those types of careers, Liepe said he’ll continue to see an “increase in the number of people demanding more pay for their skill sets.”

However, this isn’t the case for the bulk of the labor market today. With continued decreased demand for employment in most sectors, job seekers might want to temper their expectations for compensation when they land work.

“There’s a queue of people wrapped around the block for almost every job opening,” Shierholz said. “As a result, employers don’t have to pay as much to hire.”

And until the country sees sustained job growth, compensation rates in most sectors likely will remain flat.

For more information, please visit SHRM Online’s Labor Market and Economic Data page.

Joseph Coombs is a workplace trends and forecasting specialist for SHRM.

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