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Companies are giving more pay rises to keep experienced workers

By Nithya Bose in US business news, posted January 3, 2023

Experienced, long-term staff members are receiving the highest pay raises in decades, which is adding more pressure to inflation.

Research by the Federal Reserve Bank of Atlanta says workers who stayed got a 5.5 percent pay hike in November compared to the previous year.

This is the highest rise in 25 years, as in January 2022 it was just 3.7 percent.

Faster salary growth is contributing to historically high inflation, as some firms raise prices to compensate for higher labor expenses.

In 2022, prices climbed at the fastest rate in 40 years.

Inflation has slowed in recent months, but it is still high.

Employees who switched companies, roles, or careers enjoyed 7.7 percent wage rises in November over a year.

The threat of staff leaving for hefty paychecks is the primary reason firms are raising compensation for existing staff.

However, many workers aren't feeling the salary gains.

Senior economist at Lightcast, Layla O’Kane said workers in leisure and hospitality sectors can easily find job vacancies that pay more, making it more tempting to switch jobs.

She states that when the economy recovered from the pandemic, employee bargaining power strengthened.

It emboldens some workers to ask for salary increases from their current employers.

Wage and price hikes can feed off one another.

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Economists believe that greater inflation is causing some employees to seek cost-of-living rises, helping contribute to salary growth among job stayers.

Since firms can't find enough workers, wages are rising for both job stayers and job switchers.

Across the economy, job vacancies totaled 10.3 million in October, far outnumbering the 6.1 million jobless Americans searching for work.

Companies are utilizing merit increases to keep employees and reduce the potential productivity loss by recruiting and training new staff.

However, not all workers are seeing pay increases.

Wages on the whole for private sector workers actually dropped by 1.9 percent over the 12 months ending in November, after accounting for annual inflation of 7.1 percent, according to the Labor Department.

Source: The Wall Street Journal

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