The latest PayScale Index data indicates a dismal 0.4 percent growth year over year as of the third quarter of 2015. The question remains, will compensation increases remain slow to no-go for the remaining quarter of the year?Are Wages Keeping Up with Job Growth?
Let’s look at what the word has been on the street, in terms of wages keeping up with job outlook in the USA.
The Society for Human Resource Management (SHRM) predicted a year ago that there would be a 3 percent increase in compensation for 2015, based on workforce data at that time. At the beginning of this year, Paul Davidson, economics expert and reporter for USA Today, predicted that growth would “approach or exceed estimated 15-year highs experienced in 2014.” Further explanation for this growth comes from a “stronger US economy and increased employer confidence”, which have been factors that are supporting the creation of more jobs than ever before.
Andrew Soergel, US News economy reporter, highlighted a recent report released by the US Bureau of Labor, stating that, “Private sector employers spent an average of $31.65 per hour on wages and benefits for each of their workers in March ”. Further, he mentioned that, “it’s 5.5 percent higher than last March’s increase.”
So, why the sluggish wages?
Factors Contributing to Slow Wage Increases
There could be several reasons why wages are failing to keep up with the amount of jobs that are flooding the market currently. First, we’ve got President Obama in his final year of his last term in office, not making any big changes, and a 2016 presidential campaign looming on the horizon. While the President is trying to push through increases in minimum wages and continued improvements to other compensation factors, like health benefits, change is slow to come.
Below average compensation increases may also be attributed to the 2015 Affordable Health Care requirements, which put a large strain in the budgets of the most vulnerable small to mid-size businesses in the USA. A Towers Watson survey advised that employers are very worried about the rising costs of administering group health insurance plans, and are taking proactive measures to offset these costs – including putting a cap on certain expenditures.
Many employers are also in the middle of their fiscal years, planning annual recruitment and compensation budgets. They are not ready to start increasing wages, and are anticipating the changes that may occur in some states where the federal minimum wage is already going up. This means employers have to continually adjust the wages of employees who fall just above this wage too, so they can retain a strong workforce. New jobs may be in the creation stage, but generous salaries are still slow to come.
Choppy Waters Ahead for Wage Increases
Historically speaking, the PayScale Index shows that over the last seven years, growth in wages has grown steadily since the end of our brief recessionary period. However, real wages have dropped by as much as 8.4 percent over that time. (See the PayScale Real Wages Index) The economy and wages are fighting a battle, and it’s too soon to see what the outcome will be.
In a wave of recent retail chains raising their wages ahead of regulations, and more governors signing increased minimum wages into action now, we are hopeful that compensation will begin to start rolling forward again.
You can keep on top of important updates on salary and market changes by signing up for our free PayScale Index, which provides up-to-the-minute salary data to help businesses make better decisions.
What do you think?
Do you believe that wages in the USA are on the rise or the decline for 2015 and beyond? If so, what are the contributing factors? We want to hear from you! Please post your comments below.