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As Employers Seek to Rein in Wages, Workers Still Have Leverage

S.J. Steinhardt
Published Date:
Dec 5, 2022



The low unemployment rate (currently 3.7 percent) has given employees the upper hand in negotiating wage increases, but employers are trying to change that, the Wall Street Journal reported.

Job openings may be decreasing and the average number of hours worked weekly are also declining, according to the jobs report. But employees still seem to have the advantage—for now.

“The feeding frenzy of companies poaching each other’s workers has abated somewhat, but the trend of pay hikes remains quite high and is not slowing down by much,” said Stephen Stanley, chief economist at broker-dealer Amherst Pierpont.

Mike Pitts, president of Indianapolis tech-supply company IVM Inc., told the Journal that he has had to raise wages by up to 6.5 percent to attract new employees, leading his existing employees to want more, too. “It’s this barrage of microimpacts that just beats down your efforts to stay ahead of these wage gains,” he said. 

Another way for employees to increase their wages is to change jobs. Those who did raised their pay by 7.3 percent over the 12 months ending in October, compared with 5.3 percent for those who stayed put, the Journal reported, citing the Federal Reserve Bank of Atlanta. But job switching has declined from 3 percent of workers in December 2021 to 2.6 percent in October 2022, and job seekers are feeling the effects of a cooling labor market.

Employers may increase current employees’ responsibilities without increasing pay or award spot bonuses based on performance. Others may predicate wage increases on other factors. IVM's Pitts will provide the full wage increase only to employees who return to the office full time.

“We’re trying to give them the flexibility to say, ‘Hey I want to make more, so I’m going to try to make the company more productive,’” he said.

“During the recovery, there were wage increases for all,” Becky Frankiewicz, chief commercial officer of staffing firm ManpowerGroup Inc., told the Journal. “Now it’s going to be wage increases for some, and they’re going to be defined by those with the most in-demand skills.”