Story at a glance
- The Conference Board said companies are setting aside about 3.9 percent of total payroll for wage increases in 2022.
- That’s the highest recorded payroll increase since 2008.
- Some experts worry that wage increases will only further fuel inflation, as companies counter increased salaries with increased prices.
Many companies are set to increase their wages next year by the highest amount since 2009, just as the U.S. experiences record inflation and thousands of jobs remain open and unfilled.
A new report is expected this week from the Conference Board that will reveal companies are setting aside an average of 3.9 percent of total payroll for wage increases in 2022, according to The Wall Street Journal (WSJ). That’s the highest recorded increase since 2008.
The Conference Board is a think tank that surveyed 229 companies from a variety of sectors in November and found that 39 percent of respondents said inflation played a role in their decision to set aside funds for wage increases next year.
According to WSJ, the chief financial officer of retailer Big Lots Inc. Jonathan Ramsden told analysts last week that his company would face higher costs in 2020 due to, “inflationary wage and other pressures.”
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The move to increase wages means that many companies will raise salary ranges, resulting in higher minimum, median and maximum salaries across the board for workers of all levels.
The revelation by the Conference Board is consistent with many retailers offering a range of incentives, including increased pay, as many companies are struggling to retain and recruit workers. The Labor Department’s November jobs report found that the private sector had 9.5 million job openings as of September 2021.
Over the summer the Bureau of Labor Statistics also found that wages, salaries and benefits in the private sector increased 3 percent in June 2021 compared to last year. Then again last week the Labor Department reported that private-sector hourly wages increased 4.8 percent in November compared to last year.
Wages have gone up by more than 4 percent year-over-year for the last five consecutive months, as the pandemic has severely disrupted the job market and created new employment standards and expectations.
However, increased wages could push inflation up, as companies raise prices to compensate for pay increases. According to an analysis by WSJ, the dynamic of higher wages and prices could feed into each other, creating a pattern that could be challenging to stop.
Gad Levanon, chief economist at the Conference Board, told WSJ that “The impacts of wages on inflation and of inflation on wages are now stronger than they have been in recent decades.”
The Federal Reserve has also confirmed fears of lingering inflation, with Fed chairman Jerome Powell saying in congressional testimony last week, “it now appears that factors pushing inflation upward will linger well into next year.”
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