According to a Wall Street Journal report, workers who stay in their jobs are getting the biggest pay rises in decades, putting pressure on inflation.
According to the Federal Reserve Bank of Atlanta, wages for employees who stayed on in November rose 5.5% from a year earlier.
That was up from 3.7% annual growth in January 2022, the highest increase in 25 years of records, the report said.
According to the Journal, workers who changed companies, job roles or occupations saw even bigger wage increases in November, up 7.7% from a year earlier.
Workers find that employers offer wage incentives to stay in their jobs. Getty Images
“When I see that Burger King down the street is $22 an hour and I’m making $20 an hour at the Dunkin’ Donuts where I work, I know exactly what my opportunity cost is,” says Layla O ‘Kane, Senior Economist at Lightcast, told the Journal. “Employers are responding and saying, ‘Well, we’re going to raise wages internally because we don’t want to lose our already trained employees.'”
The prospect of employees leaving for more money is one of the main reasons companies are raising wages for existing employees, but faster wage growth is contributing to historically high inflation as some companies pass on price increases to offset their high labor costs.
Wage increases for employees put pressure on inflation, which is still high. AP
Although inflation has cooled slightly in recent months, over the past year prices have risen at their fastest rate in four decades. Federal Reserve officials have said they are monitoring wage increases as they consider future rate hikes to slow the economy and lower inflation. Prices rose 5.5% yoy in November, after a revised 6.1% rise in October.
Although many workers are earning more money, they are not experiencing wage increases. According to the Labor Department, wages for all workers in the private sector fell 1.9% in the 12 months to November, after accounting for annual inflation of 7.1%.
There are also signs that wage growth is beginning to cool as the labor market loosens somewhat. Average hourly earnings rose 5.1% in November from a year earlier, slowing from a March peak of 5.6%. Analysts told the Journal that wage growth could slow further in the coming months.
Consumer prices rose by 7.1% in November and have cooled in recent months. Despite this, the high prices are still hitting consumers’ wallets. Matthew McDermott
In industries with high labor demand, “companies are prepared for wage increases to accommodate inflation,” said Paul McDonald, senior executive director at Robert Half, a professional staffing firm. “If inflation falls, it will be more in line with wage growth.”
The consumer price index, a measure of what consumers are paying for goods and services, rose 7.1% in November – the slowest pace in 2022 – up from 7.7% in October.
However, wage pressures are likely to persist in highly competitive sectors. According to a Robert Half survey released in September, more than half of workers feel underpaid and four in 10 workers would quit their job for a 10 percent pay rise elsewhere.
By and large, salaries for job changers and those who stay job are increasing because companies are not finding enough support. The Labor Department said job openings — 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 more wage increases in 2023 than they have in 15 years to motivate employees, according to a Mercer survey of more than 1,000 companies.
Daniel Powers, a recent college grad, earned a 10% year-end raise at a Chicago consulting firm after starting on a six-figure salary when he was hired in September, according to the Journal.
“You understand the realities of the market — there’s no false illusion of ‘we’re a family here,'” Powers said of his company’s management.