Businesshala News Exclusive | Companies Plan Big Raises for Workers in 2022

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The Conference Board report stated that companies have budgeted more money for wage increases than at any time since 2008, citing high inflation as a reason for many.

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The survey also reveals that companies are planning to raise the salary range, which will result in higher minimum, average and maximum salaries. This suggests that wage increases may be broad-based and affect workers across the company’s pay scale.

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The results are an indication that the recent boom in private sector wages is likely to continue through 2022.

Such a sustained increase in wages could lead to an increase in consumer prices, as companies raise prices to compensate for the wage increase. Higher wages and price dynamics can further exacerbate inflation and increase the likelihood of rising wages and prices feeding off each other that may be difficult to contain.

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Roughly 39% of survey respondents said that inflation is a factor in their decision to set aside funds for wage increases next year.

“The effect of wages on inflation and the effect of inflation on wages is now stronger than in recent decades,” said conference board chief economist Gad Levanon.

In earnings calls, some companies have said that they plan to increase salaries next year. Jonathan Ramsden, Chief Financial Officer of Big Lots Inc.,

A retailer told analysts on Friday that the company will face higher costs next year due to “inflationary wages and other pressures.”

clothing retailer gap Inc.

It has also included higher salaries in its outlook, officials told analysts last month.

“We’re certainly seeing average hourly rate pressures, primarily in our distribution centers, but also in our stores,” said Katrina O’Connell, the company’s chief financial officer.

And Mark Calvoda, chief financial officer of Titan Machinery Inc., which sells farm and construction equipment, told analysts in a November 23 earnings call that it was also planning for higher compensation.

“We are feeling inflationary cost pressures in areas such as fuel, wages and employee benefits and expect those pressures to intensify in future quarters,” he said.

The Conference Board, a think tank, surveyed 229 US companies from various sectors in November. More than half the firms had more than 10,000 employees. The Conference Board began conducting annual surveys in 1998.

How long the recent high level of inflation will last is one of the driving questions of economic policymakers.

Federal Reserve officials have acknowledged new uncertainty in recent weeks about how prices will behave in the coming year. It is a change from his previous position that this year’s sharp inflation was likely to be temporary as the economy adjusted to supply-chain disruptions and a temporary labor shortage brought on by the Covid-19 pandemic.

“It now appears that the factors driving inflation upwards will persist into the next year,” Fed Chairman Jerome Powell said in Congressional testimony last week.

Now the officials are laying the foundation to take more vigorous action to curb inflation next year, if needed. Mr Powell suggested the Fed could accelerate the pace with which it is withdrawing support from the economy when it meets next week.

Officials are likely to announce plans to halt their bond-buying program by March instead of June, as they had previously predicted. This could set the stage for raising interest rates starting next spring.

The Fed cut rates to nearly zero and launched an asset purchase program in 2020 to help the US economy weather the pandemic. Removal of such housing could slow the pace of development and reduce inflation.

On Friday, the Labor Department reported that private sector hourly wages rose 4.8% from a year earlier in November, compared to October. Salaries have increased by more than 4% year-on-year for five consecutive months. In contrast, wage growth averaged 3.3% in the year before the pandemic hit the US in February 2020.

A separate measure of compensation that includes both wages and benefits grew a seasonally adjusted 1.3% in the third quarter, the Labor Department said in October at the fastest pace on record.

Higher inflation readings are accompanied by increased compensation. According to the Labor Department, the consumer-price index rose 6.2% in October over the previous year, the fastest pace in three decades. Economists polled by Businesshala expect it to accelerate further to 6.7% in November. The CPI report will be released on Friday.

Many economists had hoped that the end of unemployment benefits in September and the reopening of schools in the fall would ease the labor shortage so far. Instead, government figures show that employers continue to struggle to find workers.

In September, there were about 2.8 million more job opportunities than unemployed workers, according to Labor Department data. The department will report October job opening data on Wednesday.

In response, companies are offering new employees higher salaries. According to the Atlanta Fed, those who changed jobs between August and October saw an average wage increase of 5.1% versus 3.7% for those staying in their current jobs, an unusually large difference.

This could lead to higher wages for existing employees in the coming year, Mr Levanon said. If the pay gap between new and more experienced workers narrows too much, it could prompt experienced workers to seek higher-paying jobs.

“Faster wage growth is more institutional now,” he said.

David Harrison at [email protected]


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