Salaried employees are joining hourly workers in pushing for hefty raises, thanks to the dynamic labor market and inflationary pressures that are also raising the wages of workers, including waiters and warehouse workers.
American professionals towards the end of this year saw their compensation increase at the fastest rate in nearly 20 years, according to federal data. The specter of inflation close to an annual rate of 7%, the highest in 39 years, hangs over higher wages, meaning that rising prices will reduce and in some cases decimate the real value of wage gains. .
Wages of all private-sector workers rose 4.6% year-over-year in third quarter, federal data shows, with the largest gains going to workers in services and industries such as sales retail and hospitality.
In the management, business and finance industries, wages grew 3.9% in the quarter, slower than overall wage growth, but still the fastest pace on record. 2003 for this group of workers.
A Conference Board poll earlier this month found that employers are setting aside an average 3.9% of the payroll for pay increases next year, the highest number since 2008.
âCandidates either decline our offers or wish to negotiate more aggressively than in the past,â said Kathie Patterson, director of human resources at Ally Financial. Inc.
The Detroit-based lender is increasing wages and bonuses, and increasing its contribution to employee 401 (k) accounts.
For many workers with a college education, 2021 will end with big bonuses and raises in industries such as finance, law and technology. This group has enjoyed wage increases for decades as the wages of workers without a degree have stagnated or lost ground, according to academic research based on government data.
Compensation for junior analysts at major investment banks rose to six digits earlier this year, and partners at dozens of corporate law firms have won salary increases after Milbank LLP raised salaries for newcomers. lawyers at $ 200,000 versus $ 190,000.
In the financial arena, “there has been so much pressure on wages,” said Alan Johnson, managing director of Johnson Associates, a compensation consulting firm focused on financial services. âMy clients are understaffed. With Covid, they’ve cut hiring, and now with the economy and the markets peaking, they’re making people work very, very hard, âhe added.
All of this, Mr Johnson said, raises employees’ expectations that they will be well paid for the extra stress and work. Banks are paying with salary adjustments as well as bonuses 10 to 35% higher than last year, according to a study by Johnson Associates.
Economists worry about a wage-price spiral in which employers raise wages and then pass the increased costs on to customers in the form of higher prices, leading workers to demand higher wages to offset rising costs. price, etc. Yet compensation experts and human resources executives say the current increases are primarily due to traditional labor market dynamics and, second, to inflation.
Strong consumer demand for a range of products, including holiday gifts, mortgages and household appliances, has amplified the need for workers. At the same time, the supply of workers has plummeted due to a high rate of retirements and millions of people on the fringes of the workforce due to burnout, fears of Covid-19 and child care issues, among other reasons.
Amanda Richardson decided this year to give a 10% raise to all US employees at CoderPad, a software company. The increase, for around 40 staff members, will be split into two 5% increases, one in April 2022 and the other in October, “so it feels like we’re getting a continuous increase,” said Ms. Richardson, General Manager of CoderPad. Last year, CoderPad granted employees two increases of 3%.
She opted for 10% after her CFO attended a meeting with peer companies. When the topic of compensation was brought up, a consensus quickly emerged among attendees that increases of 10% were needed to cope with both inflation and the demands of highly sought-after tech talent. His first reaction: âIt’s crazy. Then, “We put it in the budget,” she said. âIf we’re in a peer group where companies talk about 10%, our employees will get it elsewhere if we don’t give it to them,â she added.
Beth Klem, a CoderPad employee, moved with her daughter from the San Francisco Bay Area to North Carolina at the start of the Covid-19 pandemic to be closer to her family, saying she believed she would also benefit from a lower cost of living. Some of his expenses today are higher than expected, such as his food bill. A 10% increase is “big enough to feel like it’s having an impact on my budget,” said Ms. Klem, 45.
The pressure on wages increased at the end of the year, said Irina Konstantinovsky, director of human resources at Horizon Therapeutics HZNP 1.09%
PLC, an 1,800-person biotechnology company headquartered in the United States in Deerfield, Illinois. collect new data on inflation and market rates of pay.
Horizon has also increased its 401 (k) match and is offering every employee equity and bonus. Although the turnover is low, Ms Konstantinovsky said: âIt is a risk for every business at the moment, so we cannot fall behind. “
Yet many workers nationwide will not see their paychecks stay ahead of inflation this year. On the one hand, âcompanies don’t respond to market demands in a flash,â said Diane Burton, academic director of the Institute for Compensation Studies at the ILR School at Cornell University.
““If we’re in a peer group where companies talk about 10%, our people will get it elsewhere if we don’t give it to them.”“
Most companies go through an extensive salary planning process once a year, which limits their ability to adapt to short-term conditions. Cost of living adjustments were once common in collective agreements and have made a comeback in union contracts and minimum wage laws.
Many companies are reluctant to adjust wages for a volatile factor such as inflation because wage increases are almost impossible to reverse. Instead, employers report using variable pay, such as connection bonuses and one-time allowances, to temporarily increase earnings without incurring the ongoing costs of inflation-induced wage increases.
Some companies have already determined that inflation, which until this year has been mostly between 1% and 3% per year for the past decade, will not influence salary decisions. In early December, Google’s parent company, Alphabet Inc.,
already known as a company paying the best local market rates for talent, said it would not give workers general adjustments for inflation.
Union Pacific Railway Company Corp.
expects increases of around 4 to 6% on average for non-unionized staff, according to a person familiar with the situation. Union Pacific declined to comment.
“What we generally see is that employers set wages based on the cost of labor, which is based on the supply and demand of positions,” not inflation, he said. said Lauren Mason, who advises clients on talent and employee management as a senior manager at consulting firm Mercer.
Write to Lauren Weber at [email protected]
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