Employees are Demanding Higher Wages Before Returning to the Workforce

Minimum wage increased in the Portland Metro area on July 1, 2021 to $14.00 but that likely isn’t enough to attract or retain many in the current labor market. An overwhelming amount of businesses are reporting difficulty in hiring workers and retaining existing employees. This is always a key concern for employers but not to the current magnitude. 

According to Market Watch, “In just the past two months alone, wages grew at an astonishingly high 7.4% annual pace. That’s three times the normal annual average. Most of the increases are taking place in lower-wage occupations.” It’s impacting all industries from healthcare to manufacturing, to entertainment and retail. Based on a recent study completed by Bank of America economists, “Wages for assembly-line workers grew in the first three months of the year at the fastest pace in 20 years. And those who quit one manufacturing job for another saw a 13% jump in pay,” the firm found.

The average lowest wage at which people would take a job has skyrocketed throughout the pandemic. For the first time in decades, it’s workers and not jobs that are in short supply. Wages are climbing at the fastest rate since the 1980s and according to The Bureau of Labor Statistics, average hourly earnings jumped $0.15 in May to $30.33. This increase is roughly twice as large as those seen before the pandemic and follows a $0.21 gain in April. According to Business Insider, “job openings sit at record highs, and Americans are demanding higher pay before rejoining the workforce.” Companies facing these issues are simply deciding, or needing, to pay more. Many large corporations have increased starting wages in the last year, adding to the pressure small organizations face. Target, Costco, Starbucks, Chipotle, McDonalds, Bank of America, Under Armour, and Amazon are among a growing trend of large organizations increasing their starting wages. 

Employers are also trying to get creative without increasing fixed cost base pay rates. Sign-on bonuses are another common tactic being used currently to get people in the door and retention bonuses to get employees to stay. 

Keep in mind your current employees when implementing increased starting wages, paying sign on bonuses, or any other creative compensation methods from a pay equity standpoint to ensure you are not causing any inequities.

It will be very interesting to see the trends in the coming months and what the compensation and entry wage landscape looks like.  If you need help modeling out or talking through any of these options, feel free to reach out to your Compensation Team at Cascade for support today!