Recent economic indicators offer little clarity for employers planning for wage costs this year. While the US economy added fewer jobs than expected in July, wages gains, labor force participation and the unemployment rate still indicate a strong job market. Amid an unpredictable economic landscape, HR professionals can help employers build a knowledge-based approach to pay and overall compensation and development packages.
CPI Historically Outpaces Wages
By helping thousands of workers find jobs, Employbridge has been able to track the relationship between CPI and average hourly wages since 2002. Two decades of proprietary data provide an important counterbalance to the momentary ups and downs in the market.
The 2023 Voice of the American Workforce (VOAW) survey shows that, while wages have increased over time, CPI nearly always outpaces it. Today, the difference between CPI and average wages is slightly better than in 2002.
The survey also found that lower-paying jobs (in 2022 and 2023) contracted as workers moved to higher-paying work. In manufacturing, the number of workers in the lowest-paying category (below $14 an hour) dropped 4.6% in 2023. Similarly, manufacturing workers earning $14-$15.99 an hour dropped 5.8%. In logistics, the lowest-paying roles ($14-$15.99 and $16-$17.99 an hour) shrank by 7.3% and 5.1%, respectively.
Staying Competitive by Paying It Forward
17 years of VOAW survey data shows pay is the top factor motivating workers’ career choices. Other areas that respondents value in addition to pay include greater job security and advancement opportunities, more flexibility in their schedules and more respect from their employers.
When planning annual wages, savvy employers should adopt a multi-year strategy and follow these best practices to increase value, build employee trust and sustain long-term growth:
Make turnover cost a motivating factor. Bersin by Deloitte estimates that it costs nearly $4,000 to onboard a single employee, so reducing turnover costs by offering competitive pay at the time of hire is a no brainer. In addition to killing workplace culture and team efficiency, the churn-and-burn pay strategies of the past are incredibly costly for employers and do not support steady growth over time.
Establish pay priorities that support business objectives. Engaged employees want to be bought into the workplace culture. Employers can show respect for their employees by making high-level business objectives transparent throughout every career stage. High-level decisions around pay should demonstrate consistency and commitment to communicated objectives to advance employee trust.
Invest to advance your people. Factor in varied experience levels and costs associated with professional development opportunities. Top talent want to expand their skillsets, but they also expect to be recognized for these efforts. The VOAW survey asked workers when they felt raises should be given. The top response was “based on performance” (42.5% of manufacturing and 46.4% of logistics workers), and the lowest was “when I learn a new skill.” The remainder expect pay raises yearly (28% manufacturing; 24.8% logistics) or every six months (22% manufacturing; 21.9% logistics). By providing ample professional development opportunities and incentivizing upskilling, employers can retain top talent as they advance to more skilled roles.
Bolster your benefits. Benefits like health insurance, paid time off, 401k matching and mental health services make a tremendous difference for job seekers. Providing a generous benefits package is a significant cost to employers, so it is crucial that employees recognize this commitment and take advantage of resources that can improve their overall well-being. If you notice your benefits are going largely unused, dig deeper to see if the choices you are offering are misaligned with the interests of your workforce and determine if there are any barriers to access. Work with management teams to build awareness programs that ensure employees can access and use all benefits available to them.
Listening to Your Workforce
These insights into what workers want can help employers interpret trends and set competitive rates. To take it further, establish feedback loops to listen to what matters most to your own workers. It’s safe to assume pay will always be a top priority for workers. Employers who learn how pay, opportunities, benefits and respect continue to shape workers’ job choices can differentiate themselves with effective pay strategies that show they listened, regardless of shifting marketplace pressures.