Businesses across the US are broadening pay rises as inflation gallops at the fastest pace in 40 years, as employees struggle to match their wages with consumer prices.
Retailers, airlines and resorts are boosting starting pay to attract recruits and offering company-wide bumps to staff’s base pay. Some 92 per cent of businesses plan to increase employee pay this year, up from 85 per cent in 2021, according to compensation analysis firm PayScale.
Announcements from corporate America confirm trends reported in official data as US inflation reached 7.9 per cent in February, the highest level since 1982. Federal Reserve chair Jay Powell said that wages were “moving up at ways that are not consistent” with its 2 per cent inflation target after the central bank decided to raise interest rates this month.
A monthly payrolls report due on Friday will shed new light on the strength of the US labor market – and workers’ bargaining power.
“Employers recognize that it is very difficult to hire and retain workers right now and they’re raising wages in order to circumvent these labor shortages,” says Daniel Zhao, the senior economist at jobs site Glassdoor. “The fact of the matter is that workers who are upset about inflation have more leverage now in order to actually negotiate higher pay.”
Workers have been slow to return to the labor force since the start of the Covid-19 pandemic and millions of those who are working have been able to leverage recruiters’ desperation to land new, higher-paying jobs. But then housing, transportation and food costs began to rise, forcing employers to offer broad-based pay rises and bonuses to retain staff.
Airlines started announcing rises for their employees after staff shortages caused by the Omicron coronavirus wave forced thousands of flight cancellations around the festive season.
Delta Air Lines chief executive Ed Bastian said this month that the carrier would raise base pay by 4 per cent for most of its 75,000 employees starting in May.
“This well-earned base pay increase. . . is the direct result of the dedication, hard work and excellence that you demonstrate every day, ”Bastian wrote in a memo to Delta employees.
Southwest Airlines also raised starting pay for some of its Chicago-based roles to $ 18 an hour this month, after setting a company-wide minimum wage of $ 15 an hour in June.
Retailers are also offering broad-based pay rises. Target raised its starting hourly rate from $ 15 to up to $ 24 for workers in its stores, warehouses and headquarters last month. The Minneapolis-based retailer also cut the number of hours employees need to work each week to qualify for healthcare benefits to 25 from 30.
Vail Resorts raised the minimum wage to $ 20 for workers at its 37 mountain properties in North America. The decision is part of a “pivotal shift in our company’s direction with a new strategic focus on all of you,” chief executive Kirsten Lynch wrote in an email to employees. The average hourly worker will get a 30 per cent rise, she said.
The increases are not limited to service workers. Nationwide Insurance will pay employees a minimum of $ 21 an hour, up from $ 18, starting next month. “The things that matter to workers in 2022 are competitive wages, flexibility and the ability to work for a company that reflects their values,” said Nationwide chief executive Kirt Walker.
Alison Omens, chief strategy officer of Just Capital, a non-profit group that tracks businesses’ impact on society, said the boosts to pay are both the result of intense competition for workers and employers becoming more willing to invest in their workforces after the tumult of the pandemic.
“Companies that have not historically seen workers as real value creators are taking a second look at their workers as a potential source of value,” Omens said, “and it may lead to longer-term wage growth.”
Both Starbucks and Chipotle have cited increased labor costs as justifications to raise their prices, but Zhao said other companies are more likely to allow pay rises to eat into their profit margins.
Workers’ advocates say that even after receiving rises, many salaries still have less buying power than they did before the Covid crisis. Only 44 per cent of organizations are planning to give their employees rises over 4 per cent, according to PayScale, even as inflation rises at almost double that rate.
“We’ve seen wages go [up and down] over the past two years, ”Omens said. “Half the people working in big companies were not making a living wage, so this was not starting from a good place. Then in the early days of the pandemic, we saw hazard pay, we saw bonuses, we also saw government intervention. The reality of rent increases and gas increases means that wages are once again decreasing. ”