Whether it’s the result of legislative action or simply growing demand outstripping supply, wages across the country and in virtually every industry are on the rise. Of course, that’s good news for workers, but it doesn’t have to mean gloom and doom for employers.
Real income growth long has lagged worker productivity gains, labor demand, and the cost of living, even throughout much of the current recovery from the Great Recession. But recently real growth (the nominal increase in workers’ pay minus the inflation rate) has turned significantly positive. Inflation has been under control for years, while wages have logged big gains in three of the last four years. January’s real growth rate weighed in at a robust 1.7 percent compared to a year ago. As a result, employees’ take-home pay not only was larger, but also bought more goods because prices held steady or – in the case of gasoline – fell precipitously.
Economics 101 tells us that higher wages (greater cost) will dampen demand. However, many of the same factors that drive real income growth and raise the costs small businesses must incur also reduce other costs these employers face:
Retention goes up – Companies that pay their workers higher wages discourage job switching. Well-paid workers are more content and less likely to scour online job boards looking for a better situation.
The job market loosens – As people who have left the job market are lured back in with the prospect of earning more money. This makes it easier for firms to more quickly find candidates with the skills they need to capitalize on market opportunities such and business expansion.
Productivity increases – When workers are convinced they are being paid well, they are more willing to “go the extra mile” for their employer. They spend less time grousing about their pay and more time adding value to the firm.
So rather than fighting the trend toward higher wages, some savvy businesses are exploring ways to pay their people salaries and hourly wages that create happy employees while also solving some of their most pressing human capital challenges. This might mean reevaluating your workers and what you expect from them. Job descriptions tend to evolve, and pay scales should be adjusted to correspond to new duties performed. While reconsidering tasks and their value to the company, it equally important to regularly schedule and conduct employee performance reviews in order to implement pay raises.
Benchmarking your salary ranges with similar companies in your industry and location can provide guidelines. In addition, underpaid workers will vote with their feet. If your turnover rate is significantly higher than comparable organizations or if applicants turn down job offers, you may need to bump up your compensation.
Companies seeking to mitigate their investment in workers and the accompanying higher wages may want to consider engaging a labor provider and outsourcing much of the administrative and regulatory compliance costs. KTBlack Services, for instance, can provide full-time key workers or entire crews for a variety of job titles and industries. And we can supply qualified temporary and freelance workers to help you deal with demand spikes, vacation coverage, or other short-term requirements. Find out more by contacting KTBlack today.