Wages and Salaries Finally Perk Up

Pay increases have begun to outpace inflation, the goverment reports

Stephen Miller, CEBS By Stephen Miller, CEBS November 2, 2018
Wages and Salaries Finally Perk Up

Wages and salaries for U.S. workers rose by 3.1 percent over the past year—the biggest pay hike in a decade, the Bureau of Labor Statistics (BLS) reported on Oct. 31. Meanwhile, the Department of Labor's October jobs report, released Nov. 2, showed that, for the second straight month, unemployment stood at 3.7 percent, the lowest rate since 1969. 

The findings suggest that, as the labor market continues to tighten, employers are finally willing to raise employees' pay more than just enough to keep pace with inflation, which BLS pegged at 2.3 percent.

SHRM Online has collected the following articles from its archives and other media sources to provide insights on recent pay developments.

Wage and Salary Jump Is Biggest in a Decade

Wage increases have been the missing link in the economy since the recovery began in mid-2008. Average hourly earnings have been rising steadily but the percentage increase has stayed below the 3 percent level as slack has remained in the labor market. However, the unemployment rate is now at 3.7 percent, the lowest since 1969, and wage pressures have begun to build.

"The employment cost index data adds to the broader evidence that wage growth has continued to trend gradually higher over recent quarters," said Michael Pearce, senior U.S. economist at Capital Economics. "And with labor market conditions still tightening, we expect wage growth will accelerate further from here."

Employers Giving in and Raising Pay

More than half of small businesses say they can find few, if any, qualified candidates for their open positions, according to the latest National Federation of Independent Business (NFIB) survey. Small business owners say they plan to increase employee compensation in the coming months at the fastest rate since the NFIB survey began in the 1980s.

Some have argued that companies were holding off on increasing wages because they were putting more money toward benefits. The government's Employment Cost Index also tracks benefits costs, and found that benefits grew 2.6 percent in the year ending September 2018 versus 2.4 percent in the prior year.
(Washington Post)

Amazon's Wage Hike Kicks In

Starting Nov. 1, Amazon workers in the U.S.—full-time, part-time, temporary and seasonal—began earning at least $15 an hour. The move "shouldn't come as a shock—Amazon is in direct competition with other large-scale retail stores like Walmart and Target to employ the same group of workers, and these big-box retailers have been steadily raising wages over the last few years to attract and keep the best workers," said Michael Farren, a research fellow at the Mercatus Center at George Mason University in Arlington, Va. "Amazon hired 120,000 workers for the holiday rush last year and will be hiring even more this year, so the wage increase just makes economic sense, especially given the current low unemployment rate."

However, employees criticized Amazon for paying for the wage increase by taking away bonuses and employee stock awards.
(SHRM Online)

Pay Is Rising for Seasonal Holiday Workers

Faced with higher minimum wages and a shortage of seasonal workers, many U.S. employers are offering significantly more pay to secure help for the 2018 holiday crunch. Snag, an online employment platform focusing on hourly work, found that pay for seasonal retail, restaurant and hospitality workers will increase by about one-third in late 2018 compared to the same period of 2017, to an average of $15.40 per hour. Minimum-wage laws being enacted in many states and localities—and the scarcity of skilled and willing workers—are the main drivers of the pay raises.
(SHRM Online)

Companies Boost Starting Salaries, But Getting a Raise Is Hard

Many of the companies that have recently raised pay have done so only for starting wages, said Anastasia Christman, a senior policy analyst and director of research at the National Employment Law Project (NELP), an employee advocacy group. "For these firms to be responding to the larger issues of income inequality, they need to be raising wages for all their front-line workers and, according to government data, that is not taking place," she said. "To compete with other firms seeking workers, these companies have had to raise starting wages, but once these workers are on the job, they see little income growth over time and thus have little ability to save, pay off debts, buy a home, purchase items for their children or achieve the other markers of individual economic success."
(SHRM Online)

[SHRM members-only HR Q&A: How can I locate resources for salary survey data for all industries and occupations?]

2019 Salary Budgets Inching Upward

"Expectations for growth in U.S. salary budget increases have been mounting for many months," said Alison Avalos, research director at WorldatWork, an association of total rewards professionals. An organization's salary structure is a hierarchy of pay ranges with established minimums, midpoints and maximums. In 2018, the reported overall average salary structure adjustment is 2 percent, WorldatWork reported, representing no change from 2017. For 2019, the projected average adjustment is 2.1 percent overall but 2.2 percent for exempt salaried and officers/executives.

However, if employers start hiking pay more than they anticipated to attract and keep talent, they may need to upwardly revise their 2019 salary budgets.
(SHRM Online)


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