Dive Brief:
- Wage growth is slowing, according to recent data from Indeed Hiring Lab. The company found that U.S. wages grew 5.3% year over year in May 2023, a notable decline from a peak of 9.3% in January 2022.
- Low-wage sectors are leading the slowdown, Indeed found. After lower wages grew much more rapidly than wages in medium- and high-wage sectors for years, pay growth in industries like food service and retail has slowed more than others. “The much-celebrated compression of wage inequality of the past two years seems to be ending,” Nick Bunker, Indeed Hiring Lab’s economic research director for North America, wrote in a post on the findings.
- While current wage growth is still elevated compared to pre-pandemic levels, if current trends continue apace, Bunker predicted a return to the average pre-pandemic wage growth pace of 3.1% sometime between November 2023 and January 2024. “After more than two years of exuberance, wage growth is calming down,” he wrote.
Dive Insight:
As the war for talent has raged over the past few years, wage growth has been a boon for job seekers — particularly those in low-wage industries that had seen stagnant wages for years.
In February 2022, for example, Target announced a starting minimum wage range from $15 to $24 — a significant jump from an $11 minimum wage, paid as recently as 2017. While the company previously planned an incremental move to $15 per hour, Target rolled out the expansion to $24 per hour for certain starting positions to position itself “as a wage leader in every market where it operates,” a press release from the company said.
Similarly, in January, Walmart raised its hourly pay to a range of $14 to $19 per hour, up from $12 to $18. In a memo, John Furner, Walmart president and CEO, attributed the raises to a desire to ensure the company has “attractive pay in the markets we operate,” suggesting rising salaries at competitors like Target have spurred overall wage growth for workers.
As Bunker noted, however, that unprecedented growth may be coming to an end. While that news may be discouraging for job seekers, Bunker points out that slowing wage growth may be key to controlling inflation.
Christopher Waller, a member of the Federal Reserve’s Board of Governors, talked about the connection between wage growth and inflation during a February speech at the Arkansas State University Agribusiness Conference.
“For employers, the very strong labor market makes it hard to find and retain workers. One effect of this tightness is seen in wages and other compensation, which ultimately show up in the prices that consumers pay for goods and services,” Waller said. “For example, last year the Employment Cost Index, which tracks movements in labor costs, including both wages and benefits, increased over 5 percent, the highest rate since 1984. We want to see wages grow but at a pace that is consistent with our goal of stable prices.”
