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US Firms Expect Wage Costs to Spike Nearly 4% in 2022 The November Conference Board Salary Increase Budget Survey portends a 3.9% jump in wage costs for firms in 2022, compared to 3% reported in April. This would mark the highest rate since 2008. Indeed, the swell in compensation expectations for next year reflects rising wages for new hires and inflation.
Here are the key findings:
- Average 2021 actual total salary increase budgets jumped from 2.6 percent in the April 2021 survey to 3.0 percent in the November 2021 survey.
- Projections for 2022 salary increase budgets jumped almost a full percentage point from 3.0 in April to 3.9 in November.
- Growth in wages for new hires and accelerating inflation are the main causes of the jump in salary increase budgets. The November Salary Increase Budget Survey shows that almost half of respondents (46%) said that the increase in wages of new hires played a factor in salary increase budget estimates for 2022, and 39% said that increased inflation played a factor.
I have been saying that strongly rising wages at the low end of the wage spectrum will put pressure on the whole pay scale. The CB survey confirms that:
Overall wage growth dramatically accelerated during the past 6-8 months. That increase is especially strong for workers under the age of 25 and for people who switched jobs in the past year. This suggests that much of the wage acceleration has been among workers who were recently hired.
The faster wage growth of new hires has led to pay compression, which is when wage premiums for work experience shrinks. When more experienced workers feel that their pay advantage is no longer significant, they may seek new jobs in the tight labor market, which leads to high labor turnover of more experienced workers.
Indeed, the quits rate is now the highest in recorded history. Employers faced with extensive departures of experienced workers will raise wages faster for current employees in order to maintain an effective workforce.
The November Salary Increase Budget Survey shows that almost half of respondents (46%) said that the increase in wages of new hires played a role in salary increase budget estimates for 2022. (…)
Salary increase budgets may be adjusted upwards in the coming months as more companies adjust their policies to account for the acceleration in wages and inflation. Many companies determined their salary increase budgets earlier in 2021, before the full extent of the pickup in inflation and wage growth was evident, and before they knew how much other companies would be raising salary increase budgets. In addition, wage trends for unionized workers tend to lag market wages. Therefore, an upward adjustment to wage growth of unionized workers is to be expected in the coming year.
A wage-price spiral—where higher prices and rising wages feed each other, leading to faster increases in both—may already be in the works. (…)
The rapid increase in wages and inflation are forcing businesses to make important decisions regarding their approach to salaries, recruiting, and retention. In particular, companies are likely to raise wages aggressively for their current employees or they will risk even lower retention rates. After being a non-issue in wage determination for several decades, sizable cost of living adjustments may be making a comeback. (…)
- Kellogg Workers Vote in Favor of Contract, Ending Strike Union says deal maintains workers’ cost-of-living raises, guarantees no plant shut downs for about five years
The new contract includes pay raises, new health benefits, pension multiplier increases and cost-of-living adjustments to wages, according to an outline of the agreement from the company.
“This agreement makes gains and does not include any concessions,” said Anthony Shelton, international president of the Bakery, Confectionery, Tobacco Workers and Grain Millers International Union. (…)
Veteran Kellogg employees will receive wage increases of $1.10 an hour, with newer staff and new hires making $24.11 an hour. Those newer employees will also get a new dental benefit, and all employees will get a new vision benefit offering. (…)
The agreement, according to Kellogg, includes higher pay for its employees, including a cost-of-living adjustments. The contract that Deere workers voted to ratify last month also included those adjustments. Analysts say that these types of provisions could spread in future negotiations among unions and employers. (…)
U.S. population growth falls to record low
The U.S. population grew by 0.1% in the year that ended July 1, the slowest rate since the nation’s founding, according to Census Bureau estimates released Tuesday.
The bureau said the “slow rate of growth can be attributed to decreased net international migration, decreased fertility, and increased mortality due in part to the COVID-19 pandemic.” (…)
“Between 2020 and 2021, 33 states saw population increases and 17 states and the District of Columbia lost population, 11 of which had losses of over 10,000 people. This is a historically large number of states to lose population in year,” the Census Bureau said.
- Texas saw the largest increase in total population, and Idaho’s population grew at the fastest rate.
- Texas, California and Florida all had populations of over 20 million people. New York dropped below that amount last year.
Population growth has been slowing down in the U.S. since before the pandemic.
