Labor compensation costs in the U.S. for private industry workers, including pay and benefits combined, jumped 4.8 percent year over year in March 2022, up from a 2.8 percent annual increase a year earlier, the the U.S. Bureau of Labor Statistics (BLS) reported on April 29 in its quarterly Economic Cost Index summary.
The BLS reported that:
- Wages and salaries for private-sector workers rose 5 percent for the 12-month period ending in March, up from a 3 percent increase a year earlier.
- The cost of benefits in the private sector rose 4.1 percent for the same 12-month period, up from a 2.5 percent increase the year before.
Employment costs can differ significantly among industries. Among private industry occupations, compensation cost increases for the 12-month period ending in March ranged from 4 percent for construction and maintenance occupations to 7.8 percent for service occupations.
Rising pay and benefits spending, while significantly higher than the increases employers were familiar with just a year ago, are still trailing the rate of inflation by a fairly wide margin. The consumer price index rose 8.5 percent year over year in March, the highest inflation rate since 1981, the BLS reported. In April, the CPI ticked down to 8.3 percent year over year.
Employment costs are being driven up by widespread labor shortages and inflation, leading to increased wage demands. Employers are offering higher starting pay, sign-on bonuses and enhanced benefits to recruit new hires and maintain current employees. Businesses leaders, however, are also facing pressures to control their spending given an uncertain economic outlook.
Labor costs for all civilian workers, including state and local government employees, rose 1.4 percent for the first quarter of 2022, up from a 1 percent gain in the October-December quarter, the BLS reported. Year over year, compensation costs for civilian workers increased 4.5 percent for the 12-month period ending in March, up from a 2.6 percent annual rise a year earlier.
Wages for hourly workers are rising faster than pay for salaried workers. Average hourly earnings were up 5.5 percent in April from a year earlier, the BLS reported on May 6, having risen to $31.85, and were up by 10 cents, or 0.3 percent, for the month.
Diminished Value for Paychecks
Higher inflation means the buying power of workers' take-home pay is shrinking, the BLS reported. For employees, the inflation-adjusted value of private wages and salaries fell 3.3 percent for the 12 months through March, and inflation-adjusted benefits fell 4 percent.
The BLS data "shows a sharp increase in nominal wage increases and a simultaneous plunge in real wages. This is the foundation of cost-push inflation," tweeted Gary R. Evans, professor of economics at Harvey Mudd College in Claremont, Calif.
When compared with an 8.5 percent inflation rate, "wages are not keeping up," Diane Swonk, chief economist at accounting and advisory firm Grant Thornton, told The Wall Street Journal. "It leaves workers chasing a moving target on inflation and it erodes their living standards."
Related SHRM Articles:
As Inflation Hits 8.5%, Workers Expect Bigger Raises, SHRM Online, April 2022
Salary Budget Growth of 5% Most Common Increase in New Survey, SHRM Online, April 2022
Benefits Jump as a Reason to Join or Stay with an Employer, SHRM Online, April 2022