PayScale has released new research on the impact that the coronavirus and the current economic downturn is having on wage growth. This data is available as both an interactive web page with weekly refreshed data visualizations as well as a downloadable research report analyzing wage growth trends by industry, occupation and metro area year-over-year and month-over-month.View the webpage on wage growth during Covid-19Download the research report on the impact of Covid-19 on wage growthAre you a member of the press? Contact us for access to the data or interviews with subject matter experts.
How Wage Growth Has Slowed During Covid-19
PayScale’s research on wage growth data shows that wages across industries have slowed in 2020. In the data pulled for the downloadable report in the first week of May, wage growth was a tepid 0.7 percent. The data in the second week, May 14, 2020, shows that wages have grown 1.6 percent, indicating the beginning of a slight recovery, but still reduced compared to wage growth last year. The webpage data on wage growth during Covid-19 can be refreshed weekly to show how the situation is evolving.Wage growth has slowed for most industries, occupations and metro cities in 2020 but some have been hit harder than others. In the Retail and Customer Service industry, wages have actually fallen, decreasing 4.4 percent year-over-year in May and a whopping 8.8 percent in the month of March and another 1.4 percent in April. Wages associated with new job offers in the retail sector fell 14.4 percent in March.Overall, March was a grim month for wage growth as businesses reacted to government mandates for social distancing. This was followed by massive layoffs in April, which actually resulted in a slight recovery in wages. Fluctuation week to week and month to month is normal, with wages year-over-year showing slowed wage growth during Covid-19.In an economic downturn, reduction in wages is rare. Although some businesses have announced pay cuts and reduced hours (which also results in reduced pay), the majority of companies try not to reduce compensation when revenue is down. This is partly why layoffs are common during a recession. The principle is known as downward nominal wage rigidity by economists and can be explained by organizations taking a long view when it comes to compensation and the economy. As most recessions tend to be short-lived, lasting one and half years on average in the modern era, it is better for many companies to reduce the workforce but continue to pay the remaining workers competitively — thereby keeping morale high — until the economic situation improves. This is particularly true in industries and occupations where skilled labor and training is a major investment for the company. In industries and occupations where labor is less skilled, the situation can be more volatile.During the coronavirus, retail businesses have been hit particularly hard, in some cases requiring pay cuts in addition to layoffs. However, this certainly isn’t ubiquitous across all industries. In technology, wage growth increased by 3.4 percent in the first week of May compared to last year and is actually growing faster than in 2019 compared to 2018. However, wage growth associated with new job offers has shrunk from 4.4 percent to 2.6 percent.In the most recent data pull for May 14, 2020 on the live web page, the Transportation and Warehousing industry is showing the largest year-over-year wage growth at 3.7 percent with the Accommodation and Food Services industry showing wage growth falling a negative 3.3 percent. However, when looking at the Occupation cut (which shows wage growth associated with specific job groupings rather than whole industries), Food Prepping and Serving Related positions are showing positive wage growth of 4.4 percent while Sales and Related positions are showing negative 5.3 percent wage growth.PayScale’s web page for wage growth data also looks at individual metro cities, where Seattle, WA is showing the most wage growth at 4.0 percent YOY as of May 14, 2020 and Houston, Texas (oil and gas) is showing negative 3.3 percent wage growth.
The Impact on Women
Wage growth during Covid-19 by gender also tells a compelling story. Overall, according to PayScale’s Covid-19 wage growth page, women are seeing wages slow to 0.2 percent year-over-year in May 14, 2020 while men are seeing wage growth of 1.2 percent.There have been countless articles about how essential workers during Covid-19 are disproportionately women. According to PayScale’s research on the Gender Pay Gap, women make up a larger percentage of the occupations most affected by the coronavirus, both essential workers and positions that have been let go or furloughed as a result of the coronavirus. These include occupations in Community & Social Services, Education, Library & Training, Office & Administrative Support, and Personal Care & Services. It also includes nurses.Women are also paid less than men. Holistically, women make $0.98 to every $1 men earn when all compensable factors are controlled. Women elementary school teachers make $0.92 for every $1 a male elementary school teacher makes. Women flight attendants make $0.92. Among healthcare practitioners, women family doctors (GPs) make $0.94 to the dollar. Women nurses make $0.98. Over a career, pennies to the dollar add up to $80,000 in lost wages when all compensable factors are controlled.A separate PayScale study on nurses’ wage growth in 2020 found that nurses are still seeing pay increases overall in 2020 for Q1. Women comprise 90 percent of the nursing profession and face significant health risks as an everyday part of their occupation. While some healthcare practitioners are seeing hours reduced or pay cut or have been furloughed or laid off because demand for elective medical procedures has plummeted, for Q1 holistically, nursing have seen wage growth of 3.1 percent year-over-year for all nursing titles.
How Employees Are Feeling
The live web page tracking wage growth during the coronavirus pandemic also displays how employee sentiment has changed year-over-year with updates week to week as the situation evolves. This data measures employee sentiment according to a Likert rating scale of 1 to 5 where 1 represents strong disagreement and 5 represents strong agreement.At the national level at the beginning of March in 2020, employee sentiment averaged the following:QuestionAverage ScoreSatisfaction working for employer3.6Communication with management3.6Employer has a bright future3.7Relationship with direct manager3.9Satisfaction in job3.8Sense of meaning in work3.6Stress in job/work environment3.7In looking at how employee sentiment has changed year-over-year for May 14, 2020, we can see that employees are finding more meaning in their work overall (0.4 percent), with exceptions in the industries of Accommodation and Food Services (-0.7 percent), Public Administration (-0.1) and Construction (0%) and occupations in Transportation, Materials Moving (-0.1), Sales and Related (-0.4), and Art, Design, Entertainment, Sports and Media (-0.4).The occupation most concerned for their employer’s future (-2.8 percent), most frustrated with communication from management (-2.1 percent), and the most dissatisfied overall in their job (-1.9 percent) is Farming, Fishing and Forestry. This occupation also reports the most increased stress on the job (1.2 percent).In contrast, the occupation to express the most positive employee sentiment overall, despite sweeping furloughs and layoffs, is the occupation of Personal Care and Services, with overall satisfaction with employees recorded at 2.5 percent.Employee sentiment fluctuates and can fluctuate more week-over-week or month-over-month compared to year-over-year but watching trends in this data can tell employers whether they need to be concerned about employee engagement or need to ramp up employer communications, perhaps most especially pay communications.
When Will Wage Growth Recover?
Although wages don’t tend to drop across the board in an economic downturn, wage stagnation is common and can last beyond an actual recession. The current situation is unique, with many organizations choosing to furlough workers and even issuing pay cuts while we wait to see whether economic conditions improve as swiftly and dramatically as they fell.With that said, pay cuts aren't the only way an organization can reduce costs during a recession.However, economists are currently predicting that a recession is unavoidable at this point. We can’t know for sure if we are in a recession until we have at least two consecutive quarters of negative GDP growth, but all the signs are there. The GDP fell 4.8 percent in Q1, and April was record setting for layoffs, with unemployment reaching 14.7 percent.Past research from PayScale on wage growth on the last recession suggests that wage growth can take a lot longer to recover than the actual economy. In the 2008-2009 recession, wages flat-lined for most industries and took four to five years to start rising again. Some industries were hit harder than others. For example, wages for retail and healthcare declined from 2009 until 2013 while wages for technology dipped only in 2009.How long it takes wage growth to rebound as a result of the current crisis remains to be seen. We can reasonably expect recovery to be slower than employees would like, but with different recovery periods for different industries and occupations. Occupations requiring the most in-demand skills or in locations with the quickest economic recovery are likely to rebound first. Employers with access to differentials impacting salary will be the best equipped to adjust compensation accordingly.
Tools for Getting Pay Right
The research on wage growth during Covid-19 is built upon PayScale’s Crowdsourced data, which is currently being offered for free to new and existing customers of PayScale’s MarketPay product. Fresh compensation data can give businesses a competitive advantage when it comes to strategic workforce planning and managing compensation in unique and changing circumstances, especially as many organizations reassess remote work strategies and how to compensate employees based on their geographical location as well as their skills.To view PayScale’s weekly refreshed wage growth data and access the whitepaper analyzing The Impact of the Current Economy on Wage Growth, please visit: https://www.payscale.com/data/covid-wage-growth.To learn more about PayScale’s compensation management software and how the freshest, most accurate, and more nuanced salary data can assist you in workforce planning, contact us for a demo.Are you a member of the press? Contact us for access to the data or interviews with subject matter experts.
