For many Americans, income growth has been lackluster throughout most of the recovery but there are a few encouraging signs that wage inflation is starting to pick up. For example, new data from the Federal Reserve Bank of Atlanta showed that hourly wages have increased by 3.9 percent over the past twelve months. That is a full percentage point higher compared to this same period last year and the fastest pace of nominal wage growth seen since November 2008. Annual wage growth for prime-age (25 to 54 years) workers in America climbed to 4.3 percent in October, according to the FRBA data, one of the best readings since 2002. The recent acceleration in income growth has occurred even as the unemployment rate has changed very little over the past few months, perhaps related to more employers starting to respond to the realities of a tightening labor market. The stronger wage gains likely also explain why the labor force participation rate is higher than it was a year ago, with the main catalyst being a slowdown in the flow out of the labor force, i.e. fewer workers exiting.
Despite the welcome uptick in wages, the (statistical) gains so far might have only been noticed by economists. At least that is what a new survey from Willis Towers Watson suggests after finding that roughly one in four U.S. workers still believe that they are not being paid fairly when compared with individuals in similar roles at other companies. Twenty-two percent of respondents even reported feeling the same way about their pay when compared to other people within the company they work for who hold similar jobs. Laura Sejen, a managing director at Willis Towers Watson, stressed that “pay equity is rapidly becoming a high priority for employers, especially with base pay continuing to be the most frequently cited reason employees choose to join or leave an organization.” Any employees who perceive that they are not being paid fairly can also wind up having a negative effect on workplace engagement, productivity, and in turn the overall financial performance of the company. Kate Van Hulzen, global practice leader at Willis Towers Watson, added that “The importance of effective employee communication around pay has never been greater. … Employers should take this opportunity to conduct analyses of both external market competitiveness and internal fairness.”
Sources: FRBA, MacroBlog, EconoTimes, Willis Towers Watson, Benefits ProPost author: Charles Couch