Wages in United States were stagnant over the years. In recent months, workers in U.S. are getting big salary raise thanks to millions of job openings. The prospective workers find themselves in the best position to negotiate a better deal from employers. This situation is becoming a challenge for the employers to attract and retain employees.
Employment Cost Index
The employment cost index (ECI) is a measure of wages, salaries and benefits. ECI rose to 1.3% during the last quarter. This is the biggest jump in employment cost index for the past two decades. The index has gained 3.7% over the past 12 months. Wages and salaries spiked 1.5% during third quarter. This has doubled as compared to the increase of 0.7% during the second quarter. The tightening labor market is causing increase in wages as employers are scrambling for workers. The phenomena is contributing to high inflation as well.
Workers Negotiating Power
Josh Biven, working as director of research at Economic Policy Institute says that workers have unique power to ask for more. In wake of inflation workers can argue that thy need a raise to keep up with the rising prices. This is turning out to be an effective approach as employers are also struggling to find and retain workers. Biven further stated that the trend seems to continue unless there some big policy changes. Although the trend would not last very long. For employers, it is in their best interest to pay high wages to the employees to retain the workers rather than searching for new hires. The research also suggests that higher wages lead to lower employee turnover.
Challenge for Small Businesses
According to National Federation of Independent Businesses, small businesses are struggling to hire workers. Around 51% of small business owners that they have job opening which they could not fill in September. With so many jobs for offering, employers are offering lucrative offers with signing bonuses, bigger paycheques and better benefits. Indeed conducted a survey which showed that employers offering remote work options along with higher wages are likely to attract job seekers.
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