Wages at a Twenty Year High
Like a pebble thrown into a pond, the pandemic continues to send out ripples that are affecting the daily life of the consumers across the United States. The country is experiencing a phenomenon of severe labor shortages coupled with the highest wages in 20 years, and experts are not quite sure which way the pendulum will swing when all the dust settles. One thing is for certain: employers are straining their creative and monetary resources in order to keep their business afloat.
Workers at the Top in Labor Market
Recently the Bureau of Labor Statistics explained that workers’ pay had jumped 1.5 percent for the last quarter ending in September, with benefits cost rising .4 percent. The higher wages were led by retail employees who saw an increase of 5.9 percent, as well as hotel, restaurant, and bar employees at 8.1 percent. These numbers reflect the businesses that were hard hit during the pandemic lockdown, and certainly illuminate the tattered hospitality industry as they struggle to get back on their feet after the chaos of the pandemic.
There are many reasons why wages are rising, and the most important reason has to do with the law of supply and demand. There simply are not enough workers for all of the jobs that need to be filled. And because of this, the workers who are in the picture are getting paid a premium. With a revived interest in getting back to “regular life” after the lockdown and uncertainty of the pandemic, many Americans are getting back to their normal shopping, dining out, and coffee-drinking habits. Add to this the positives brought about by the Covid-19 vaccine, and even businesses like Starbucks and McDonald’s are hurting for workers and raising their wages to staff their restaurants.
Money is not the only perk for workers in this post-lockdown world, however. According to the AP Newswire, for the first time in two decades, the workers themselves are on top of the food chain as it comes to the job market. Along with higher wages, workers are receiving more benefits and other creative perks such as flexible work hours and hiring bonuses.
How Will Inflation Affect the Economy?
More money in workers’ paychecks sounds fantastic, but will Americans really be experiencing more money in their monthly budgets? Jason Furman, a former top economic adviser to President Barack Obama, asserted that when adjusted for inflation, wages are still trailing the pre-pandemic level, especially considering the price spike of big ticket items like furniture, airline tickets, and used cars. And with all the troubles experienced by the supply chain and lack of key people in key roles, the cost of products will continue to increase.
Although individual employees may be happier with a bigger paycheck, where is all of this increased compensation going to come from? It stands to reason that the consumers will be bearing the burden of the increased compensation for workers.
According to Bloomberg, “Some companies -- like Chipotle Mexican Grill Inc. and Tesla Inc. -- have raised prices to help offset increased labor costs, fueling concerns the rapid wage increases could lead to a wage-driven inflationary spiral.”
“Companies looking at their budgets realize that [raises] are probably not going to meet inflation,” said John Dooney, a human resources manager with the Society for Human Resources Management. “But what we see is more strategies around really rewarding high performers.”
One important key to the problem is that many companies have been affected by the slow downs in the supply chain. And as the old saying goes, time is money. The longer things take to get where they are going, the more they will cost in the long run to get there. Companies are paying for elements of the shipping process they have never had to before, including renting space at ports while they wait for truckers. Sherwin-Williams Co. CEO John G. Morikis said, “We have had to make some wage rate adjustments in some of our factories, distribution centers and fleet drivers to I’d say attract and retain some of our employees.”
On the surface, higher wages seem like a positive for workers across the nation. But in order to raise wages, employers will need to cut costs somewhere else. And with tangled supply chains across the globe, there is very little wiggle room. Consumers can expect to foot some of the bill.