Dive Brief:
- Wages have grown in the year's second quarter in response to labor shortages, according to the latest ADP Research Institute Workforce Vitality Report. Q2 of 2019 marked a 4% year-over-year growth in U.S. workers' wages, the report showed.
- "The tight labor market is pushing companies to pay more," Ahu Yildirmaz, co-head of the ADP Research Institute, said in a media release. Most sectors are struggling with a labor shortage, Yildirmaz said, and many employers are opting to raise wages in order to retain what talent they do have.
- Robust wage gains for workers in the manufacturing (4.4% growth to $29.83 per hour) and construction (4.4%, $28.65 per hour) industries drove much of the annual growth, ADP said. These two sectors notably struggle with a labor shortage.
Dive Insight:
As the labor market continues to tighten and unemployment hovers below 4% nationally, more economists have been questioning whether wages will respond in turn. A letter from the Federal Reserve Bank of San Francisco published at the beginning of 2019 noted that the bank does "not foresee a sharp pickup in wage growth nationally if the labor market continues to tighten as many anticipate." Experts also previously told HR Dive that employers may feel wary to raise wages suddenly, especially if the market's stability suddenly collapses amid rumors of a looming recession. Remote work and contingent hiring have also muted some wage growth.
However, employees have routinely said in studies that they would leave their jobs for a higher salary elsewhere. Millennials, one of the largest groups currently working right now, also have stronger retention rates when they have solid base pay, a Mercer analysis showed. Money still matters in the war for talent, especially in highly competitive and in-demand fields, like tech.
Employers that are hard-pressed to raise wages, however, have other avenues to improve retention. Initiatives including paid time off and flexible working schedules are routinely popular ways to keep people on board, Glassdoor said in a 2018 study; in fact, flexible work is almost seen as the new norm by many workers.
