It Pays to Stay

Companies are increasing wages to retain workers and decrease job poaching as the labor market remains hot.

January 04, 2023

ALEXANDRIA, Va.—Companies are paying their employees to stay, reports the Wall Street Journal. Wages for workers who stayed in their roles were up 5.5% in November year over year, according to the Federal Reserve Bank of Atlanta, up from 3.7% in January 2022 and the highest increase in 25 years.

Job seekers in retail and leisure and hospitality can easily find jobs that offer more pay, making it enticing to switch, Layla O’Kane, senior economist at Lightcast, told the Journal.

“If I can see that the Burger King down the street is offering $22 an hour, and I’m making $20 an hour at the Dunkin’ Donuts that I work at, then I know very clearly what my opportunity cost is,” she said. “Employers are reacting to that and saying, ‘Well, we’re going to increase wages internally because we don’t want to lose the staff that we’ve already trained.’”

Those who switched jobs saw an average wage gain of 7.7% in November year over year, and the prospect that employees might leave for bigger paychecks is a main reason companies are raising wages for existing employees, according to the Journal.

O’Kane added that as the economic rebounds from the pandemic, employees have been more emboldened to ask for more pay from their current employers.

Paul McDonald, senior executive director at Robert Half, a professional staffing company, told the Journal that in industries with high demand for workers, “companies are prepared for wage growth to match inflation. As inflation comes down, it will be more in line with what wage growth has been.”

Inflation was 7.1% in November, which was the slowest gain in 12 months. Inflation peaked in June at 9.1% and has been slowly trending downward, but prices are still above the 2.1% average rate in the three years before the pandemic. Although inflation has cooled in recent months, it’s still historically high, and rising wages are contributing to inflation as companies pass along rising labor costs to their customers.

According to a Robert Half survey, more than half of professionals feel underpaid, and four in 10 workers would potentially leave their jobs for a 10% raise elsewhere. In industries where job poaching is common, wage pressures will likely continue, according to the Journal.

At Famous Toastery, a Charlotte, N.C.-based breakfast, brunch and lunch chain, wages are up 15% year over year for existing kitchen employees across eight company-owned locations. In order to make up for the increased labor costs, the restaurant raised menu prices.

“We didn’t want to be as easy to poach,” Mike Sebazco, the company’s president, told the Journal. He said managers from other companies will go to the restaurants dumpster pads to tell workers ,“‘Hey, come work for me, and I’ll give you an extra $2 an hour,’” Sebazco told the Journal.

The Journal reports that most business executives remain confident that they can pass along wage increases to consumers in the form of higher prices, said Lauren Mason, senior principal at consulting firm Mercer LLC. “This makes compensation investments somewhat easier to absorb,” she said.

However, wage and price increases can feed inflation, making the cost of living go up, and many workers are seeking cost-of-living increases, helping contribute to wage growth among job stayers, economists say.

Also, the job market is still tight. U.S. employers added 261,000 jobs in October, and job openings were at 10.3 million in October, which far outnumbered the 6.1 million unemployed Americans looking for work that month.

Companies are also incentivizing employees to stay for their first 90 days on the job, which executives and human resource specialists say is key to long-term retention.

Marissa Andrada, chief people officer at Chipotle, told the Journal that “if you see someone hit the three-month mark, the reality is, they’re going to be here for at least a year.” Chipotle offers its employees consistent scheduling and gives new hires a clear explanation of company operations and benefits, according to Andrada. The tactics are designed to help employees be comfortable in its restaurants and motivated to stay, she said.

A major factor in whether a person sticks around for the first three months is their connection with the company, executives told the Journal.

Other companies believe innovative scheduling is the key. One Chick-fil-A in Miami has been using a three-day work week to recruit and retain employees, and it’s working. The shortened work week began in January, and according to the store operator, employee retention is at 100%, and a recent job posting for the store received 429 applications within a week of posting. Fast-casual restaurant chain Dig is testing a four-day workweek with its full-time staff.

NACS hosted three webinars this summer that discussed innovative ways to address the labor shortage facing the convenience retailing industry, including flexible and innovative scheduling.

NACS has partnered with The Good Jobs Institute on how c-store operators can provide “good jobs,” which meet people’s basic needs and offer conditions for engagement and motivation. The Good Jobs Calculator, designed exclusively for NACS members and the convenience industry, allows retailers to use their own data and customized assumptions about the amount of improvement or uplift achievable, enabling executives to run scenarios on the bottom-line impact of a Good Jobs system.

Revisit “Understanding Your Local Labor Landscape” in the December 2021 issue of NACS Magazine for tips on building an effective employee value proposition and how to gain an edge when competing for candidates.