Human Capital & Careers

Sudden Hike in Wages Is Biggest in a Decade

With unemployment at its lowest rate in five decades, attracting and retaining workers becomes a top operational priority.
David McCannNovember 1, 2018
Sudden Hike in Wages Is Biggest in a Decade

Faced with historically low unemployment that has worsened the long-entrenched shortage of skilled workers, companies are ramping up employee compensation to a degree not seen in a decade, new data indicates.

On Wednesday the Bureau of Labor Statistics revealed that wages and salaries rose 3.1% for the 12-month period ending in September. It was the largest 12-month increase since 2008. At the same time, the official unemployment rate has sunk to 3.7%, the lowest since 1969.

Wages and salaries in the transportation and warehousing sector shot up 4.3% over the 12 months, the most in 16 years.

However, employers paid for the compensation increase by holding benefits in check. Their benefits costs rose 2.6% over the 12-month period, including a barely-there 0.4% in this year’s third quarter.

Since benefits account for 30% of total labor costs, employers’ total labor-cost increase for the 12 months was only 2.8%, despite the 3.1% wage and salary growth.

In an odd juxtaposition, on Thursday Gallagher Benefit Services released a report, based on a survey of more than 4,241 employers, indicating that the record-low unemployment is actually pushing them to loosen the benefits purse strings.

For example, nearly half (45%) of the organizations represented by survey participants chose this year not to increase employees’ share of the cost of health-care benefits.

Also, for 60% of employers, attracting and retaining talent ranked as a higher priority than controlling benefit costs. As such, according to Gallagher, companies have been adding muscle to their benefits offerings by beefing up everything from the number of health-benefits choices to tuition assistance programs to life insurance.

“While keeping a lid on costs is always important, we are seeing a clear shift in the market as employers are having to compete more aggressively for talent,” said William Ziebell, president of Gallagher Employee Benefits Consulting and Brokerage.

He added, “Today’s workforce is comprised of five very different generations, meaning it is no longer good enough to simply offer standard medical coverage a competitive retirement plan.”

Still, survey participants’ satisfaction with their health benefits hasn’t budged from Gallagher’s previous survey in 2017.

One likely reason is the expense of family coverage, the firm said in its survey report. The research revealed a disparity of 28 percentage points between employers who believe that such coverage is affordable (53%) and those that have the same take on their individual coverage (81%).

4 Powerful Communication Strategies for Your Next Board Meeting