US employers are facing a severe labor shortage crisis. There are surplus jobs as compared to available workforce. In wake of this crisis employers are forced to increase the wages to attract and retain the workers. During the last few weeks companies like Amazon, Walmart, Starbucks and Costco have increased their minimum wages. This is the highest pay increase in the last 20 years.

Stats from third Quarter

Workers have gained more negotiating power due to availability of surplus jobs in the U.S. According to US Labor Department, pays have increased by 1.5% whereas value to benefits has increased by 0.9% during the last quarter. The wage increase during the second quarter of 2021 was 0.9%. Hence, there is stark difference in wage increase.

Pay Raise and Inflationary Effects

Workers have got an upper hand for the first time in the last two decades. Workers are demanding higher salaries, better benefits and perks like flexible hours. Contrary, inflation is US is also on a rise and it is feared that inflationary effect will eat up these wage raise. However, the inflation was 1.2% during the third quarter which is still lower than the wage increases of 1.5%. Economists believe that the real benefits of higher pay will be determined if the inflationary effects fade away in coming months.

Comparison from Past

US witnessed significant wage increase after the great depression of 2008-2009. However, post-pandemic pay increase is much higher than that period of 2009. This could be due to the different nature of the two recessions and government strategies during both periods. The government stimulus is much higher during and after Covid-19 outbreak as compared previous one.

It is observed that low paid workers are experiencing more gains. Restaurant, bars and hotels have increased their wages by 8.1% as compared to the third quarter of last year. Retail sector have also raised their wages by 5.9%. The stimulus package provided by the government has forced these sectors to pay high wages to attract workers back to work.

The pay increase is on a rise along with inflationary effects. The economists and US government are carefully monitoring the affects of this pay raise in long-term.

 

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