Companies offer big raises to keep workers, adding to inflation
Workers who keep their jobs are getting their biggest pay rises in decades, putting pressure on inflation, according to a Wall Street Journal report.
According to the Federal Reserve Bank of Atlanta, wages for employees who kept their jobs rose 5.5% in November from a year earlier.
This represents an increase from the annual growth of 3.7% in January 2022, marking the largest increase in 25 years of record keeping, according to the report.
According to the Journal, workers who changed companies, jobs or occupations saw even bigger wage gains of 7.7% in November compared to a year earlier.
“If I can see that the Burger King down the street is offering $22 an hour and I’m making $20 an hour at the Dunkin’ Donuts where I work, then I know very clearly what my cost is. opportunity,” Layla O’ Kane, senior economist at Lightcast, told the Journal. “Employers are reacting to that and saying, ‘Well, we’re going to raise salaries internally because we don’t want to lose the staff we’ve already trained. “”
The prospect that employees could leave for more money is a key reason companies are raising wages for existing employees, but faster wage growth is contributing to historically high inflation as some companies pass on the hikes. prices to offset their heavy labor costs.
Although inflation has eased slightly in recent months, prices rose at their fastest pace in 40 decades last year. Federal Reserve officials said they were watching wage gains as they considered future interest rate hikes to slow the economy and lower inflation. Prices rose 5.5% in November from a year earlier, down from a revised increase of 6.1% in October.
Even though many workers are making more money, they are not feeling any wage gains. According to the Labor Department, wages for all private sector workers fell 1.9% in the 12 months to November, after accounting for annual inflation of 7.1%.
There are also signs that wage gains are beginning to slow as the labor market eases a bit. Average hourly earnings rose 5.1% in November from a year earlier, slowing from a high of 5.6% in March. Analysts told the Journal that wage growth could continue to slow in the coming months.
In sectors with high labor demand, “companies are ready for wage growth to keep pace with inflation,” said Paul McDonald, senior executive director of Robert Half, a professional recruitment firm. . “When inflation comes down, it will be more in line with wage growth.”
The consumer price index, a measure of what consumers pay for goods and services, rose 7.1% in November – the slowest pace in 2022 – from 7.7% in october.
In competitive sectors, however, wage pressures are expected to continue. According to a Robert Half survey published in September, more than half of professionals feel underpaid and four in 10 workers would leave their jobs for a 10% raise elsewhere.
Generally speaking, the salary increases for people who change jobs and those who stay in their jobs because companies do not find enough help. The Labor Department said job postings — at 10.3 million in October — far exceeded the 6.1 million unemployed Americans looking for work that month.
As a result, companies are budgeting for more merit pay increases in 2023 than they have in 15 years to incentivize employees, according to a Mercer survey of more than 1,000 companies.
Daniel Powers, a recent college graduate, earned a 10% year-end raise at a management consulting firm in Chicago, after starting with a six-figure salary when he was hired in September, according to the Log.
“They understand the realities of the market – there’s no false illusion of ‘we’re family here,'” Powers said of running his business.