Wages Surge For Workers Who Stay Put
BY GABRIEL T. RUBIN AND SARAH CHANEY CAMBON
Workers who stay put in their jobs are getting their heftiest pay raises in decades, a factor putting pressure on inflation.
Wages for workers who stayed at their jobs were up 5.5% in November from a year earlier, averaged over 12 months, according to the Federal Reserve Bank of Atlanta. That was up from 3.7% annual growth in January 2022 and the highest increase in 25 years of record-keeping. Faster wage growth is contributing to historically high inflation, as some companies pass along price increases to compensate for their increased labor costs. Prices rose at their fastest pace in 40 years earlier in 2022. Inflation has cooled in recent months but remains high. Federal Reserve officials are closely monitoring wage gains as they consider future interest-rate increases to slow the economy and bring down inflation.
Employees who changed companies, job duties or occupations saw even greater wage gains of 7.7% in November from a year earlier. The prospect that employees might leave for bigger paychecks is a main reason companies are raising wages for existing employees.
Many workers aren’t feeling the pay gains, though. Wages for all private-sector workers declined 1.9% over the 12 months that ended in November, after accounting for annual inflation of 7.1%, according to the Labor Department.
Workers in sectors such as leisure and hospitality can easily find job openings that might pay more, making it more enticing to switch jobs, said Layla O’Kane, senior economist at Lightcast. “If I can see that the Burger King down the street is offering $22 an hour, and I’m making $20 an hour at the Dunkin’ Donuts that I work at, then I know very clearly what my opportunity cost is,” she said. “Employers are reacting to that and saying, ‘Well, we’re going to increase wages internally because we don’t want to lose the staff that we’ve already trained.’ ” Employee bargaining power has increased as the economy rebounded from the pandemic, likely emboldening some employees to ask for wage increases from their current employers, Ms. O’Kane added.
Alexandria Carter, a billing specialist and accountant at an insurance company in Balti-more, received a promotion and a small pay bump earlier in 2022. After her year-end performance review, she received another 7% pay increase to reward her for her progress, and her bosses told her about their plans for her to keep moving up in the company. That was a contrast with some previous jobs she has held. “They were telling me that I’m excelling in my position, and I just got it,” she said. “To have that recognition and that they notice the work I’ve put in and to be rewarded, it’s just nice.”
There are signs wage gains are beginning to ease as the tight labor market loosens a bit. Average hourly earnings were up 5.1% in November from a year earlier, slowing from a recent peak of 5.6% in March. Many analysts expect wage growth could cool further in coming months.
Alexandria Carter, above left, a Baltimore billing specialist and accountant, received a promotion and two pay increases this past year. Employees are getting more merit and other raises as bosses try to prevent poaching by rivals, including in the restaurant and hospitality industry. FROM LEFT: ALEXANDRIA CARTER, RACHEL WOOLF FOR WSJ
In industries with high demand for workers, “companies are prepared for wage growth to match inflation,” said Paul McDonald, senior executive director at Robert Half, a professional staffing company. “As inflation comes down, it will be more in line with what wage growth has been.” The consumer-price index, a measurement of what consumers pay for goods and services, climbed 7.1% in November from a year earlier, down from 7.7% in October. The pace built on a trend of moderating price increases since June’s 9.1% peak. Still, wage pressures will likely continue in a competitive job market where poaching remains common. More than half of professionals feel underpaid, and 4 in 10 workers would leave their jobs for a 10% raise elsewhere, according to a Robert Half survey released in September.
Many businesses in the Boston Fed district cited labor costs as a bigger source of inflationary pressure for 2023 than other types of expenses, according to the central bank’s Beige Book. Wage and price increases can feed off each other. In fact, higher inflation is pushing some workers to seek cost-of-living increases, helping contribute to wage growth among job stayers, economists say. More broadly, pay is rising for both job stayers and switchers because companies can’t find enough workers. Across the economy, job openings— at 10.3 million in October— far exceeded the 6.1 million unemployed Americans looking for work that month.