In the fight to attract talent, companies began offering pay hikes to stand out from their competitors. That trend appears to be continuing even as the labor demand softens, The Wall Street Journal reported Dec. 4.
Annual growth in hourly earnings rose from 4.9 percent in October to 5.1 percent in November, according to the Labor Department's most recent report. Despite this, hiring managers appear to be less desperate — the labor force shrank in November to be smaller than before the pandemic, and in October, job openings were 7 percent lower than at the same time last year according to the Journal.
"The feeding frenzy of companies poaching each other’s workers has abated somewhat, but the trend of pay hikes remains quite high and is not slowing down by much," Stephen Stanley, chief economist at broker-dealer Amherst Pierpont told the Journal.
Wage growth must level out in order for the Federal Reserve to balance inflation, the Journal reported. When companies are paying employees more, they tend to raise prices. And pay hikes have a trickle effect — if existing workers see a new hire being paid more, they will likely demand even higher pay to match their experience.
"It’s this barrage of microimpacts that just beats down your efforts to stay ahead of these wage gains," Mike Pitts, president of technology supply company IVM told the Journal.
To counteract wage hikes, some companies are being more selective about who gets higher pay, according to the Journal. Some are giving full-time office workers pay raises, but not remote workers. Others are implementing productivity-based bonuses rather than across-the-board pay gains.
But even though labor demand is slowing down, some workers will still have leverage to demand higher pay, the Journal reported.
"During the recovery, there were wage increases for all," Becky Frankiewicz, chief commercial officer of staffing firm ManpowerGroup, told the Journal. "Now it’s going to be wage increases for some, and they’re going to be defined by those with the most in-demand skills."