Report Confirms Accelerated Growth in Wages

Employers react to a tightening labor market by boosting wages

By Stephen Miller, CEBS Apr 27, 2016
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The U.S. labor market demonstrated its improvement in the first quarter of 2016 with faster wage growth, according to the latest quarterly report by the ADP Research Institute in Roseland, N.J., an affiliate of payroll services firm ADP.

Rising wage growth was evident in almost all industries and in all age groups among full-time workers, as employers appear to be reacting to a tightening labor market by boosting wages to retain talent, according to the ADP Workforce Vitality Report, released in April.

The index, which measures the total wages paid to the U.S. private-sector workforce, grew by 3.2 percent compared to a year ago.

First quarter (Q1) year-over-year wage growth for full-time job holders increased by half a percentage point from the fourth quarter of 2015 (Q4 2015), whereas the growth rate for those switching jobs (from one full-time position to another full-time position) slowed slightly, although job switchers still maintained higher overall wage growth than job holders.

Year-Over-Year Wage Growth: Q1 2016

 

Source: ADP Workforce Vitality Report


“The findings may be a signal that continued employment growth is leading to a smaller pool of available talent, in turn motivating employers to increase wages to retain experienced workers,” said Ahu Yildirmaz, vice president and head of the ADP Research Institute.

That assessment is shared by HR consultancy Mercer, whose recently released 2016 Global Talent Trends Study shows that 9 out of 10 organizations anticipate that the competition for talent will increase in 2016, and more than one-third expect this increase to be significant.

Wage Growth by Industry

Wage growth for full-time job holders accelerated in every industry with the exception of natural resources and mining, ADP found.

The highest acceleration occurred in the information industry, where the growth increased by 0.8 percentage points from last quarter on a year-over-year basis.

Other industries that experienced strong wage acceleration included leisure and hospitality; finance and real estate; and trade, transportation and utilities. In the case of leisure/hospitality and trade, “the implementation of higher minimum wages in some states and municipalities may have impacted the first quarter wage growth,” Yildirmaz said.

By Industry
Year-over-year wage growth for full-time job holders

Industry

Q4 2015

Q1 2016

All

4.1%

4.6%

Information

5.6%

6.4%

Leisure and hospitality

4.2%

5.7%

Finance and real estate

4.3%

5.3%

Construction

4.4%

5.1%

Professional and business services

4.1%

5.0%

Manufacturing

4.3%

4.7%

Trade, transportation and utilities

3.9%

4.3%

Education and health services

3.7%

4.1%

Natural resources and mining

1.0%

0.6%

Source: ADP Workforce Vitality Report


Wage Growth by Age

The youngest job holders, under 25 years of age, saw their wages rise by 9.2 percent in the four quarters ending with the first quarter 2016. Job switchers in this demographic saw their wages rise by 11.1 percent. Most of the overall wage growth of 6 percent for job switchers can be attributed to the under-35 age groups.

By Age
Q1 2016 year-over-year wage growth for full-time job holders and job switchers (full-time to full-time positions)

Annual Wage Growth

Job
Holders

Job
 Switchers

All

4.6%

6.0%

16 to 24 years old

9.2%

11.1%

25 to 34 years old

7.2%

10.0%

35 to 54 years old

4.4%

4.9%

55+ years old

2.7%

2.2%

Source: ADP Workforce Vitality Report


Other Factors

In terms of other labor market dimensions, the best wage growth for job holders was in the West, for those with 3 to 5 years of job tenure and among those employed at the largest companies.

By Best Dimensions
Q1 year-over-year wage growth: who fared best among job holders

Dimension

Description

Q1 Year-Over-Year
Wage Growth

Tenure

3 to 5 years

5.8%

Company size

1,000 or more employees

5.1%

Region

West

5.1%

Source: ADP Workforce Vitality Report


Stephen Miller, CEBS, is an online editor/manager for SHRM. Follow me on Twitter.

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