You got a raise last year or switched jobs for a raise. Congratulation! You are one of the many Americans who see their wages growing. Unfortunately, unless your salary or wages are much higher than average 4.5 percent last year, inflation may have canceled it. That means while you can make more money, you can buy less things with it.
That’s bad news for you, but it can also be bad news for your boss. Employers are finding it difficult to retain and attract workers in the midst of the great resignation, a broad term to describe the past few years, when workers quickly left for higher wages or greener pastures. If inflation continues to soar, we could be stuck in a pay rise cycle only to see those gains wiped out by inflation. If inflation calms down, like economists expectThe situation could lead to much-needed real wage increases for American workers.
Currently, inflation is at a 40-year high, with prices averaging 7.5 percent higher compared to a year ago. That number takes into account the entire basket of goods and services, so it will affect everyone differently based on what they buy, but overall, the price increase is higher than the typical wage increase. Price increases are especially high for things like fuel, meat, or cars, and are rising even faster than that average.
In other words, if you make $20 an hour in 2020 and work 40 hours a week a week for the year, you’ll earn $41,600. For the purposes of this thought experiment, let’s assume you pay no taxes or Social Security and actually buy nothing else. That means your total salary will be enough to immediately buy a new car by the end of December 2020, when they average $41,000, by Kelley Blue Book.
Now, let’s say you get a 5% increase to $21 an hour in 2021. If you work the same amount — and again, no taxes, Social Security, or purchases — at the end of the year. , you will earn $43,680 but no longer will be able to buy a new car, currently priced at $47,000. You’ve made more money, but it’s worth less.
Titles about worker power and salary increase obscures the fact that those wages have less purchasing power. While nominal hourly earnings – or how much you are paid – increased by an average of 5.7% in January 2022 compared to January 2021, real wages – or wages adjusted for the effect of inflationary – rejected almost 2 percent.
Even frontline workers, who have seen some of the biggest wage increases since the start of the pandemic, have seen at least half of those gains wiped out by inflation, follow a Analysis of the Brookings Institution of the largest and most profitable retail, grocery and fast food companies.
To complicate matters further, work has worsened for many people since the outbreak of the pandemic. A high quit rate means a smaller number shoulder the workload used to be performed by a larger number of workers, contributing to high burnout rates. That’s not to mention the increased risks of the pandemic itself, creating more hazardous work environments and adding labor like making sure customers are wearing masks.
“No one thinks when you sign up to be a cashier that the job is going to be life-threatening,” Molly Kinder, a Brookings member and author of the report, told Recode, of the dangers. danger of those working in the front posts at the sites. as grocery stores or pharmacies face exposure to the virus. Kinder says a Kroger employee she’s interviewing isn’t sure getting a raise will be enough to offset the increased stress.
“She went on to talk about how important a $15 salary is. Well, she finally got it and she said, ‘Is it worth it when my mental health is taking a hit, it’s risky, and I’m paying more at pump?’ “
According to a new survey of more than 5,000 employers in industries by salary Payscale software company.
Fortunately for you, we are in a unique historical period in which inflation is expected to decline but labor shortages are not.
“Workers have more leverage in negotiations, and that can be a counterforce to some of the challenges we face,” said David Smith, an economics professor at Pepperdine Business School. . “That will be beneficial in the long run.”
For now, those increases are needed to keep up with rising commodity prices. But if commodity prices drop, this overdue wage increase could have real implications for Americans.
What employers will have to do about it
Inflation is bad for employers because they have to spend more to keep their employees from looking for better wages elsewhere. To retain those workers, employers may need to raise wages with inflation, offer better benefits, or change the way they operate.
A raise is the simplest approach. About 44% of companies – significantly more than the six years Payscale collected this data – said they plan to grow 3% or more this year on average. Less than 10 percent are increasing wages by more than 5 percent, which would be more consistent with inflation.
Shelly Holt, human resources manager at Payscale, said: “There are some employers who just go out there and say, ‘We have enough wealth, and we can go out and dominate the industry. compensation as a different person,’ said Shelly Holt, chief human resources officer at Payscale. “When you look at a midsize organization or a smaller organization, they may not see the luxury of doing that.”
Those companies will have to rely more heavily on other types of perks to attract and retain employees. That could include better health care coverage, more time off, and telecommuting options, among other services. That aligns with some of the perceptions people had during the Great Resignation.
“Employees are looking for more than just pay. Pay is an important factor, but they want a flexible workforce, they want a better life, and that also increases what [employers] Holt said.
Payscale finds that companies are offering a wider variety of benefits this year than they did before the pandemic. Before the pandemic, 40% of companies surveyed offered remote working options, now 65% have done so. The market share of companies offering mental health and wellness plans has increased 7 percentage points to 65 percent this year. The market share of companies that offer four-day workweeks and childcare benefits has also increased moderately.
According to Allie Kelly, marketing director at recruitment platform Jobvite. That means constantly re-evaluating services to keep up to date with what’s important to their employees.
“People have different views and understandings of their self-worth and what is important to them in their lives. Money is part of that but it’s still not enough,” Kelly said, citing various perks like childcare, shorter workdays and more professional development, alongside cheaper benefits and pay. higher.
While potentially cheaper than the 7.5% annual increase, many of these perks really cost money. Companies will have to decide if they can or should pass those costs on to customers, which could exacerbate inflation, or if they can swallow them up as a cost of doing business. According to Erica Groshen, senior economic adviser at Cornell University’s labor school, that could mean opening fewer hours, or producing fewer tools, or reducing their profit margins.
“We have historically high margins right now, and they’ve been around for a while,” said Groshen. “So historically that wouldn’t be considered a crisis.”
And, as has long been feared, the increasing cost of human labor is also accelerate the transition from wage labor to automation. Although expensive, the robots don’t keep asking for more and they don’t get sick during the pandemic.
Professor Shivaram Rajgopal of Columbia University’s business school, to the extent possible, employers will replace humans with machines.
“Now you are looking for the menu through a QR code,” says Rajgopal. “Next is to just order [on a device] and it goes to the kitchen. We don’t need a lot of people waiting for us.”
However, for those of us who have yet to be replaced by robots, the current employment situation could work out in our favor. That’s because while inflation will likely subside, the demographic that led to the labor shortages – an entire generation of retirement boomers – is not going away.
“I don’t think you’re going to suddenly see a shift of power back to the employer,” said Kinder, from the Brookings Institution. “A good outcome would be if inflation cools, if some supply and demand issues are corrected and if workers continue to have some bargaining power.”
In other words, your next pay rise could feel a lot better if you don’t have to pay so much for everything else, but we’re still not sure when the high inflation will end.
https://www.vox.com/recode/22933594/pay-raise-price-inflation-employers-great-resignation Wages rise but prices are higher: How inflation is affecting workers’ wages