SHRM may be forecasting another 3% wage increase for 2015, but a study by Moody’s Analytics claims that many employees are way ahead of the curve, averaging increases of 4.53% in the third quarter of 2014, which is more inline with the results of PayScale’s 2014 Compensation Best Practices Report that showed the average increase companies expected to give in 2014 was 4.5%.
The SHRM study used data from payroll and HR service provider ADP and culled information from 24 million workers—estimated to represent nearly one fifth of all employees.
Industries paying the most
Here’s a breakdown of the average increase by industry:
- Financial services (4.88%)
- Construction (4.80%)
- Trade (4.62%)
- Professional services (4.61%)
- Other (4.57%)
- Manufacturing (4.32%)
- Leisure and hospitality (4.21%)
- Healthcare and education (4.20%)
The study also reported increases by region, company size, age, wage tier, tenure, gender, and full-time versus part-time status.
In general, young people with the least experience are seeing the biggest percent increases, while older folks with greater experience are seeing the smallest percent increases.
Companies with fewer than 50 employees gave the largest raises at 4.85%.
A sign of good things to come?
Conversations about the “war on talent” (man I hate that expression), the skills gaps, and why employers can’t find decent workers are all fine and good, but many have questioned whether employers can really be hurting for talent while at the same time refusing to increase wages.
Is it possible ADP’s data has made that question moot?
Well, that position seems a tad hopeful, but it’d be foolish to dismiss the data out of hand, too.
The report is authored by Mark Zandi, Chief Economist at Moody’s Analytics, who says “The U.S. labor market is kicking into high gear.” While admitting that ADP’s data has “various idiosyncrasies” Zandi nonetheless claims it’s a “good leading indicator that suggests if we continue to create jobs at the pace we have been recently, the job market will be tight enough in three, six, nine months that we will see pay raises across the board.”
Why the optimism?
Why is Zandi so optimistic? For one, he points to consistent job growth (employers are adding on average 225,000 new jobs each month) and a steadily decreasing unemployment rate. He also claims that better jobs are being added to the economy—in construction, education, and local government—in contrast to the part-time and low-wage jobs created in the hospitality and retail industries during the earlier days of the recession recovery.
Cutting the slack
Zandi says gains in job growth are “causing slack in the job market to diminish quickly” and that “slack” includes the long-term unemployed, those who’ve dropped out of the workforce discouraged by few job opportunities and low wages, and those working part time who’d prefer to work full time.
Too good to be true?
Zandi predicts “slack in the job market could be completely absorbed and the economy back to full employment in late 2016” and adds that this prediction is consistent with data from the Bureau of Labor Statistics.
Zandi also postulates that if ADP’s data are truly reflective of a trend, “Workers’ share of the economic pie will stabilize and may even increase,” resulting in more consumer spending and a greater demand for housing.
Keeping an eye out
Still, we’ve got a ways to go before breaking out the bubbly. For their part, Moody’s promises to “continue to study the ADP hourly wage data, along with other labor market metrics available from the new dataset” in the coming months.
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