Higher Wage Growth Expected for 2017

Wages are forecast to rise by 3.2% year over year in first quarter

Stephen Miller, CEBS By Stephen Miller, CEBS January 30, 2017
Higher Wage Growth Expected for 2017

Wages in the U.S. are forecast to grow by an average of 3.2 percent year over year (measuring changes during the previous 12 months) in the first quarter of 2017, according to a January report by a pay consultancy. 

During the fourth quarter of 2016, "The incoming [Trump] administration's plan to promote business and reduce regulations resulted in stronger-than-average wage growth in select industries and jobs, which should continue into the first quarter of 2017," said Katie Bardaro, vice president of data analytics and lead economist at PayScale, a Seattle-based provider of compensation data and software.

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"Many experts expected to see poor performance across various economic indicators due to uncertainty after the election, as markets and industries lacked confidence about the future climate for our businesses," Bardaro said. However, the Q4 2016 PayScale Index report shows "wage growth was not only positive, but outperformed expectations."

The Bureau of Labor Statistics recently reported that the average hourly wage rose in 2016 by 2.9 percent over the year, using a different methodology.

The last time wages fell at the national level was during the second quarter of 2015, Bardaro noted.

PayScale uses a predictive model that incorporates the consumer price index and U.S. unemployment rates. Many pay professionals reported at the end of 2016 an average 3 percent salary budget increase for 2017.

U.S. Wages: Year-over-Year Changes by Quarter: 2007-17

payscale-index-chart (1).png

Source: PayScale.

The index follows changes in total cash compensation for full-time, private-industry employees, using the firm's data on over 35 million workers representing over 12,000 unique job titles.

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HR Wage Growth Lags

Jobs in the fields of human resources, media/publishing, and architecture/engineering had the lowest growth of all job groupings last year, the index showed. Annual wages for HR jobs grew by only 0.9 percent year over year in the fourth quarter of 2016.

One likely factor restraining HR wage growth—and leading to the reduction in the size of HR staffs—is "the belief that HR work can be easily outsourced," said Jade Makana, PayScale's director of content marketing and author of the firm's recent post "Human Resources Pros: How Not to Get WalMarted out of a Job." She said that many people believe "the narrative that technology can just take care of everything, but this is untrue, especially in human resources. While there are certainly some manual human resources duties that could be automated by technology, at the end of the day, human resources is about people supporting people."

Makana advised HR professionals to make the case to senior management that "life at work happens in real time, and there needs to be a real-time, 40-hours-a-week HR professional to deal with [workforce issues] as they arise. Left unaddressed, human resources issues will only fester and exacerbate [without] a real-time employee present to nip them in the bud."

Wage Growth by Sector

In addition to HR wage growth, the report looked at other job groupings and industry sectors. Among the highlights:

  • Wages for transportation jobs saw the largest percentage increase last year with a 4.5 percent annual wage growth, greatly outpacing the national average.
  • Food service and restaurant wages grew by 3.6 percent over the past year.
  • Legal jobs experienced strong annual wage growth of 2.8 percent. These jobs have lagged behind the national average for the last decade but surged in the fourth quarter of 2016.

Related SHRM Online Articles:

Wages Are Rising, Giving HR New Worries, SHRM Online Staffing Management, January 2017

Employers Budgeting for Retention in 2017, SHRM Online Compensation, November 2017

CHRO Pay Trails Other Top Executives, SHRM Online Compensation, October 2016

Expected 2016 HR Pay Raises Trail Others, SHRM Online Compensation, October 2015

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