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The big resignations are coming amid rising inflation and as employers face the tightest labor market in recent history, how much to raise staff salaries in 2022 is a big question. challenge. Corporations are generating record profits, and workers are being forced to keep up with rising costs for basics including food, gas, cars and housing. But that doesn’t mean next year’s wage growth will match the current hot inflation situation.
Read the latest inflation from Consumer price index reached 6.8%. about half of the current price increase.
Recruiters have taken it easy over the past decade. Inflation has lasted from 1% to 2%, while wage growth has increased from 2% to 3% over the same period. But for the first time in several decades, “inflation is a key factor in determining annual gains,” said Gad Levanon, chief economist at the Conference Board.
This tension between employers and workers was evident at a meeting between the tech giant Google and its employees this week, from which CNBC received audio and video about staff are told As a rule, their increase will not match the current rate of inflation.
CNBC’s latest All-American Economic Survey shows Inflation definitely overshadows Covid is the primary concern of the public.
Amid these concerns, pay budgets are expected to grow 3.2% in 2022, according to Mercer . Compensation Planning Survey. Including performance, along with other basic pay raises such as promotions, that estimate comes in at 3.5%. But even as inflation continues to pick up, Mercer’s outlook is only marginally better than the 3% and 3.3-percent wage growth it forecast in August. And the increase from the 2021 gain is small. – this year is 2.8% deserved salary increase and total salary budget increase is 3%.
In a tight and tight labor market, workers are uniting at levels not seen in recent decades and millions of workers are leaving their jobs – 4.2 million workers quit in October, a number that fell slightly from the previous month but kept total employment unchanged at 11 million. The turnover rate remains at a 20-year high and employee expectations are at an all-time high.
Salary increase is still likely to increase in 2022
Employers already have to increase incentives, pay and opportunities to attract and retain workers, and next year’s pay hike should at least add up.
“In 2021, most of the company’s increases will be much less than the cost of living increases,” Levanon said. “In 2022, it could be more equal.”
Many companies are monitoring inflation on an ongoing basis and are making decisions to raise wages more than they previously forecast. Compensation consulting firm Pearl Meyer conducts an annual survey of pay budget expectations. Over the summer, data showed a “low 3%” wage growth forecast for 2022, but as the company began to hear more anecdotes about much larger increases and more concern about retaining and attracting employees, new members, the company decided to re-survey the companies. at the end of November. Half of the companies said that they review their payroll budget for 2022 and is expected to post a higher gain than originally forecast.
All in all, the pay budget forecast rises to 4.2 percent, “well above the low 3 percent we’ve seen in 20 years,” said Rebecca Toman, vice president of survey business at Pearl Meyer. know. Of the half of businesses that say they are increasing their payroll budget, the average is now 5.2%, and 25% say they are planning to increase their payroll budget by more than 6%. “Companies are rethinking and that is significant movement,” said Toman.
“While compensation budgets may not rise to the level of employee expectations, they are the highest we’ve seen since,” said Lauren Mason, senior principal in Mercer’s career business division. since the 2008 financial crisis”. “These compensation budgets also do not include ‘out of cycle’ pay increases that employers have made throughout the year,” she said. These minimum wage increases are being driven by large employers and therefore a larger share of the US workforce, she added.
Leaving for a better job
The balance between the tightening labor market driving wage increases and the economic and health uncertainty from successive waves of the Covid virus, and now the omicron variant, most companies are still grappling with. to attract and retain the workers they need.
That means leaving your job could be a quicker route to a better pay package.
The reality is that most employees will have no trouble finding a new role, and potentially a premium for job transitions, the authors of the Mercer survey write.
“Quit your job and take advantage of the signing bonus, higher salary, and better incentives that employers offer,” said Andrew Challenger, senior vice president of career transition and replacement company Challenger, Gray. The company is offering to engage employees as “the best way to do it as a worker”, & Christmas. “Or negotiate with your employer to match competitive wages in this rising inflationary environment,” says Challenger.
“Many workers move on to other jobs and get substantial raises, and in many cases even more [increase] on the cost of living,” Levanon said.
Most economists expect both inflation and wage inflation to continue to rise into 2022, Challenger said. But inflation, even if it keeps rising, is expected to be just right final. “It doesn’t mean it’s going to be two months, it could be a year. But it’s not going to be, you know, 4 or 5% a year for the next five years,” said Lawrence Mishel, a well-known expert at the University of California. The Economic Policy Institute, recently told CNBC.
It is a consideration for companies in raising wages because once workers are paid higher, it will be difficult to adjust downwards in the coming years as inflation declines. In fact, the level of the compound increases every year.
CEOs, record profits, and a C-suite view of wages
Executives, even at record levels of corporate profits, are worried about what is known as a wage-price spiral, with higher labor market costs leading to higher inflation. widespread. The Fed said it hasn’t seen signs of that yet but it needs to be watched based on the realities of the labor market and the economy.
“Finding employees is still very, very difficult, and it’s important that they’re talking about it being widespread, not simply within a business unit,” said Roger Ferguson, a former Fed vice president and a Distinguished Fellow at the Council on Foreign Relations told CNBC’s “Squawk Box.” on Friday. “We’re starting to see that this is being integrated into pricing for the end product, and we’re starting to see the beginnings of what we call a wage price spiral.”
From a stock market perspective, the more companies pay, the more margin they may have to put down, and that won’t make shareholders happy.
“Wage inflation is what I want to focus on,” David Kostin, Head of US Equity Strategy at Goldman Sachs, told CNBC on Friday. “It put pressure on some companies on profitability, and in 2002, he took control of companies that had a high percentage of operating costs that came from labor,” he said. “It’s a headwind that will be persistent,” he said.
The biggest distinguishing factor in Pearl Meyer’s data, and between companies that are planning stronger pay hikes, is privately owned versus public and nonprofit, Toman said. profit. Private companies are planning the biggest price hikes, and they don’t face the same shareholder scrutiny as publicly traded companies. But public companies can also deal with pay in other ways, including long-term equity and other incentives.
“It’s important for employees to keep in mind that pay isn’t the only investment that employers are investing in their workforce,” says Mason. “Employers have invested significantly in providing more diverse health and well-being benefits throughout the pandemic.”
Mercer’s survey reports that 1 in 4 employers increased their bonuses by 10% more than last year.
“Due to the economic uncertainty surrounding the pandemic and the emergence of omicron variation, employers are turning to variable compensation as another means of increasing employee pay,” said Mercer. without permanently affecting the cost structure”.
Companies offer special bonuses to recognize “unusual” circumstances, Toman said.
In fact, Google recently decided to give employees a one-time cash bonus.
Unlike base salary variations over time, long-term bonuses and incentives provide employers with the option to maintain base wages while providing employees with multiple benefits. than. Before making any move based solely on wages, it is important for workers to consider the full compensation picture.
Many factors can cause inflation to moderate over time – even if it has remained above-normal over the past decade – from the parts of the supply chain that are being worked on and especially in the markets. labor market, more and more people are returning to work. The current surge in demand for workers and a lack of labor supply has led to wage inflation, and Challenger said filling 11 million open jobs would be one way to help bring inflation down. Many will return to work. Even with a high degree of openness, Jobless claims just hit five-decade low.
But with inflation expected to remain extremely high through the first few months of 2022, it’s important to note that annual wage increases typically occur between January and April and are likely to remain high. employing workers to adjust wages in line with economic realities. Companies that responded to Pearl Meyer’s survey told the compensation consultant that they will continue to closely monitor inflation numbers. “We know that’s the main driver of these larger-than-usual increases,” Toman said. “And we could even see some companies add to their mid-year gains in 2022 if they find that they’re not keeping up,” she said.
Even if the data suggests wage growth won’t match inflation, Toman said there’s one finding from the compensation world that should make workers happy. Nearly all (99%) of respondents plan to raise their salary in 2022. “We don’t usually see that,” Toman said. “And that also says a lot. If you don’t have a raise this year, you’re really behind the timeline in 2022.”
–By CNBC Eric Rosenbaum contributed to this report
