USA Today asks a very troubling question: “Is the annual pay raise dead?” When clients ask me about the job market, I tell them that the problem isn’t jobs. It’s getting paid. Wage increases have ticked up at about 2%, which for most people is not enough to cover increased costs. Bob Sullivan of CNBC, the author of the USA Today article, cites an expert from AON Hewitt, who said, “Base salary increases are flat. We don't see the prospect of that changing much at all in the next several years.” Rather than annual salary increases, many companies are turning to bonuses as a way to reward productive employees while better controlling labor costs.
The article goes on to state that employee turnover is high and “critical-skill” employees are hardest to retain. Go figure. Why should employees be loyal to companies that only care about the bottom line? They are following market forces just as their employers are. I agree with an expert quoted at the end of the article who urges workers to know and refine their most marketable skills. But I’ll take it one step further: Rather than hope that your current employer rewards you with a bonus, always be ready to find a better employer if your compensation is not fair or if a better option is available. Treat your career like a business.
Bloomberg’s Peter Gosselin and Jennifer Oldham have written a great article that examines the relationship between unemployment and wages. According to accepted economic norms, as the labor market gets tighter, salaries should go up. While the unemployment rate has dropped 5.5% over the last seven years, the growth in hourly earnings was minimal. On the state level, the difference is even more pronounced in states that have the lowest unemployment. The article features some compelling graphs and possible explanations for this trend.
What the article doesn’t speculate on is a possible tipping point. I think it is significant that Walmart and other large retail corporations are raising salaries of their lowest paid workers. I think they are increasing wages to keep good workers who can now find higher paying jobs. Once retention of employees becomes an accepted business practice across industries, salaries will go up – I hope.