With current inflation clear but the direction from here less so, much will depend on the pace of wage gains and to what extent companies try to offset this cost pressure, which is typically the biggest in one’s P&L. The subject quote was from Minneapolis and this was noteworthy from KC, “Multiple contacts reported novel ancillary benefits, such as ‘no-meeting Wednesdays’ and subsidized pet care services, to attract workers.” Here are the other wage comments from today’s Beige Book and pressures are intensifying:
Boston:
“Wages posted strong gains on average, with year-over-year raises ranging from only slight to a robust 10 percent.”
NY:
“Contacts in all sectors continued to report widespread wage increases. An upstate New York employment agency noted continued escalation in wages while a New York City agency reported that there are large gaps between candidates’ salary requirements and prospective employers’ offers. Minimum wages across New Jersey and much of New York State were notched up on January 1st. More broadly, looking ahead to 2022, businesses across all major sectors foresee annual wage increases averaging around 6 percent.”
Philly:
“Wages continued to rise substantially. The share of nonmanufacturing firms reporting higher wage and benefit costs per employee held steady at 60 percent. No firms reported lower compensation.”
Cleveland:
“With labor demand outpacing labor supply, wages continued to rise. Nearly 70 percent of business contacts indicated that they had increased pay rates during the prior two months, a share that was virtually unchanged since our last report. While wages are rising most notably among hourly workers, salaried workers are seeing meaningful increases, as well, according to our contacts. Anticipating little relief from labor shortages in the near term, firms expected competition for workers to remain intense, keeping upward pressure on labor costs.”
Richmond:
“Wages increased strongly with many contacts reporting higher than usual year-end wage increases. Several noted that those increases were in addition to off-cycle wage increases already made this year to attract and retain workers.”
Atlanta:
“Upward pressure on wages remained relatively widespread. Increases were most notable at the lower end of the pay scale and among new hires. Most contacts indicated they feel like they are chasing market wages to attract and retain staff. Wage growth remains above plan for most firms, and many anticipate higher wage growth in 2022.”
Chicago:
“Overall, wage and benefit costs increased robustly. A scarcity of applicants for open positions led numerous contacts to raise wage offers, yet not all were successful in filling open positions. To retain workers, many employers increased the frequency of pay raises. Furthermore, contacts said they were giving larger-than-usual raises and year-end bonuses to account for inflation or share healthy profits with workers.”
St. Louis:
“Wages continue to grow strongly, particularly for traditionally low-wage positions. One Little Rock restaurant reported paying its dishwashers $13 per hour and skilled kitchen staff $16 per hour or more, and an Arkansas manufacturer reported plans to soon increase its starting wage by more than 10 percent.”
Minneapolis:
“Wage pressures remained strong. Surveys since the last report found strong wage growth in construction, manufacturing, and hospitality-tourism; more firms increased wages, and by larger amounts. More than 40 percent of hospitality and tourism firms reported wage increases of 5 percent or more over the last year. A South Dakota state budget proposal included a 6 percent raise for state workers, including teachers and corrections employees. Nonprofits were reportedly dealing with growing turnover as workers left for higher compensation offers in the private sector. Among firms, said one contact, “The wage-increase conversation is just as hot as the difficulty-hiring topic.”
KC:
“Wage growth continued to be robust and broad-based in recent weeks. Looking ahead, contacts reported further expectations of robust wage growth. Planned wage increases for workers in service and transportation sectors were particularly elevated, though generally above historical averages across industries. In addition, contacts reported other non-wage costs are expected to rise at a solid rate in 2022. For example, businesses are making larger contributions to health savings accounts, insurance premiums, retirement plans, and adding vacation time. Multiple contacts reported novel ancillary benefits, such as “no-meeting Wednesdays” and subsidized pet care services, to attract workers.”
Dallas:
“Wage growth remained at or near record highs. While some contacts noted wage increases were concentrated more among low-skill workers, others said they were more evenly distributed across skill levels. Also, some contacts reported that raising starting wages successfully attracted workers, while others noted that their increased wages were still being met with demands for even higher pay. A large transportation services company said they increased wages for package handlers to $20 an hour earlier in the year and recently offered referral bonuses to employees, more paid time off, and tuition reimbursement. According to a December Dallas Fed survey of more than 300 Texas business executives, wages rose 7 percent in 2021, on average, up from a reported 2 percent in 2020 and 4 percent in 2019.”
SF:
“Wage pressures increased further over the reporting period due to the continued competition for talent. Many employers mentioned giving year-end bonuses to top performers and boosting base salaries by 3 to 10 percent. Several contacts also mentioned significantly expanding equity compensation at the executive level in order to retain talent. Two contacts noted that to help employees with the unexpectedly higher cost of health insurance renewals, one of them raised wages more than initially planned while the other absorbed the higher costs.”