ALEXANDRIA, Va.—The U.S. employment cost index increased by 1.4% in the first quarter, which is the largest advance on record, reports Bloomberg. The final months of 2021 saw a 1% increase. Labor costs were 4.5% year over year, which is the most in more than two decades.
Wages and salaries were up 4.7% year over year, which was another record, and benefits rose 4.1%.
“The stretch of healthy gains in employment costs underscores how rising wages are a key part of the inflationary picture, and if sustained, will keep pressure on the Fed to take a more aggressive approach to policy,” writes Bloomberg.
Despite high wage increases, workers aren’t making more money, as wages are not keeping up with inflation.
“If productivity growth does not pick up and wage growth does not slow down, the Fed will likely need to hike by more than the 300 bps or so of tightening markets have currently priced in,” said Bloomberg Economist Anna Wong.
It’s not just wages that are increasing the cost of labor, Bloomberg reports, but also high prices for materials and ongoing supply chain challenges. Input prices were at a record high this month.
But wage increases could cool, said Bloomberg. “Recession odds are creeping higher amid expectations the Fed will move aggressively to get a handle on red-hot inflation. And the latest figures on economic growth were weaker than expected. As a result, wage gains may moderate in the months ahead,” writes Bloomberg.
Companies are increasing their spend on employees to remain attractive in a tight labor market. Tyson Foods announced it would spend $60 million to cover 100% of all tuition, books and fees for its employees who want to earn an associate degree, undergraduate, master’s, career certificates and literacy and technology fundamentals.
Tyson Foods is partnering with social impact company Guild to expand its existing Upward Academy program to include access to more than 175 programs from over 35 of the nation's top universities and learning providers.
Meatpackers in particular are having a hard time recruiting employees, reports Business Insider. JBS USA began offering free college for its employees and one child per employee last year.
Verizon recently bumped its minimum pay to $20 an hour for starting employees, but current employees also will receive a raise if they’re not making that amount.
Nearly every company is feeling the effects of the tight labor market. Amazon is reportedly looking to recruit high school graduates to work in its warehouses, and Tyson Foods has expanded its immigration assistance program to help more of its immigrant employees become U.S. citizens, in an effort to recruit and retain workers as the U.S. continues to struggle with labor shortages. Walmart will now pay its truck drivers up to $110,000 in their first year, and the retailer is launching a 12-week program that allows its supply chain associates in certain markets to earn their commercial driver’s license and become long-haul truck drivers for Walmart.
In a recent Convenience Matters podcast, McKinsey and Company experts share why employees leave their jobs, what employers think are the reasons and what it would take to keep employees from quitting. Listen to Convenience Matters podcast episode No. 332 “Is the Great Resignation Over?”
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