What to Expect from the Labor Market: Recruiting, Wages and Legislation
Recruitment and unemployment, wage growth, minimum wage and the legislative outlook are all going through massive changes, especially in light of the interest rate increases.
By Susan Palé, CCP
Inflation. Inflation. Inflation. We not only hear this word 15 times a day, we experience it every day – at the gas pump, supermarket and that before-work coffee and bagel purchase.
Many economists are concerned that the interest rate increases approved by the Federal Reserve will slow economic growth and cause a recession. It’s too soon to know, and although the labor market remains strong, there are some signs of changes ahead.
Here are some things you need to know:
RECRUITMENT AND UNEMPLOYMENT
On Aug. 30, the United States Department of Labor issued its July Job Openings and Labor Turnover Survey (JOLTS Report).
Job openings have changed very little since July. The biggest decreases in openings occurred in the Durable Goods Manufacturing sector. During the same 30-day period, hire and separation numbers remained mostly unchanged. The U.S. unemployment rate was 3.76% in August/July 2022.
The Department of Labor also reports that all jobs lost to the COVID-19 pandemic have now been recovered.
There are some changes to note here. The job opening numbers have — until now — been steadily increasing, as have the hire and separation numbers. It’s too soon to tell if the July numbers are a “blip” or indicative of more changes to come.
Tips for employers:
>>Identify the best resources to help you stay informed about labor market activity in the market(s) where you operate and consult those resources regularly.
>> Anticipate continued difficulty recruiting, especially entry-level candidates.
>> If raising pay is necessary to hire new talent, review pay levels for current, experienced employees to ensure internal equity.
>> Streamline your application process. Many candidates report “giving up” trying to apply online because of a confusing, convoluted or redundant application process.
The Conference Board recently reported that real wages are on track to increase by 3.9% in 2022. That would be the largest increase since 2008. And employees in all roles — executives, managers, professionals and hourly — are expected to receive similar increases.
Wage growth will also vary by geography. In areas with low unemployment and high worker demand, expect wages to rise sharply and quickly. In areas with high living costs, wages will rise to keep pace with those costs, which may, in turn, cause employers to raise prices — perpetuating the “wage-price” spiral that currently exists.
Despite high wage growth, the current inflation rate of 9.1% (the highest recorded in 40 years) results in negative wage growth for many employees. What does that mean? For an employee making $40,000, the individual’s real income is reduced to $36,664 when the current inflation rate is considered.
Tips for employers:
>> Develop and implement a long-term salary planning process that addresses current and anticipated labor market issues.
>> Be aware of differing costs in different labor markets. This variance is critical for employers doing business in multiple locations.
>> Review current pay policies for competitiveness in recruiting market(s) and anticipate the need to increase wages to recruit and retain.
>> Consider other types of salary increases (e.g., equity increases, bonuses, special incentives) to supplement or replace the standard yearly increase of 2% – 3%.
The federal minimum wage remains at $7.25 and is not likely to be raised any time soon. Twenty-one states currently have a minimum wage of $7.25.
As always, states and municipalities are well ahead of the federal government in raising wages to address living and labor costs. A lot of these changes take effect mid-year. Some states that recently enacted changes include CA, CT, DC, FL, IL, MD, MN, NV and OR.
Tips for employers:
>> Be aware that minimum wage changes may not be state-wide and may not take effect on Jan. 1.
>> Understand that even though a location may have a specified minimum wage, prevailing wages for specific jobs in specific markets may be well above these minimum levels.
>> Keep informed of what’s happening at federal, state and local levels in all the locations where you do business.
The proposed 2023 Department of Labor budget includes major funding to expand Registered Apprenticeship opportunities, funding to allow the Occupational Health and Safety Administration (OSHA) to rebuild its rule-making and enforcement capability and expand its whistleblower protection program, and increased funding for the Wage and Hour Division to more aggressively enforce rules regarding the misclassification of employees as independent contractors.
The United States is one of the few western countries that doesn’t offer paid family leave to employees. A federal proposal for paid family leave, originally included as part of the Build Back Better Act, is being considered by both houses of Congress as a stand-alone proposal but is not expected to advance.
Eleven states and the District of Columbia now offer some type of paid leave for employees. Federal employees are also eligible for up to 12 weeks of paid leave under the Federal Employee Paid Leave Act (FEPLA) of 2020.
Tips for employers:
>> Consider subscribing to Affinity HR Group’s HR Support Plan, which tracks state legislative updates that affect workplace policies and practices (www.affinityhrgroup.com/hrsupportplan).
>> Identify additional resources to help you stay informed of changes and new requirements at the federal, state and local levels and use those resources regularly to stay informed.
>>Increase focus on compliance. Expect increased enforcement of OSHA, Office of Federal Contract Compliance Programs, and Department of Labor Wage and Hour Division standards and rules.