For the first time in decades, the American worker is in charge when it comes to money.
As an example, some employers, such as Kroger Co., Chipotle Mexican Grill Inc., and Under Armour Inc., are frantically raising hourly wages in order to retain workers. Or how others, such as Starbucks Corp. and Drury Hotels, are dangling hiring bonuses in front of entry-level candidates. Or the fact that CVS Health Corp. no longer requires job applicants to have a high school diploma. Or how Dan Sacco, the owner of Your Pie restaurants in Iowa, instructs his general managers to poach employees from competitors with better hours and higher pay.
It is unclear how long all of this will last in the erratic and disjointed economic recovery that has ensued since last year’s pandemic collapse. But one thing is certain: Workers are getting the biggest raises since the early 1980s. Wages in the leisure and hospitality industry have increased at a 6.6 percent annualized rate over the last two years. And, according to data released on Friday, payrolls rose at the fastest rate in nearly a year, indicating how desperate employers are to fill positions.
There is a chance that the party will wind down as the delta variant causes an increase in coronavirus infections and hospitalizations in the United States, primarily among the unvaccinated. Because of virus concerns, some events, such as the New York International Auto Show, are being canceled. Alphabet Inc.’s Google, Amazon.com Inc., and BlackRock Inc. have all recently postponed plans to return to the office. Bank of America Corp. economists have reported a slowing in credit-card spending momentum.
Another complicating factor limiting the benefits of pay raises is inflation. Consumer prices rose 5.4 percent year on year in June, the fastest rate since 2008. According to a Peterson Institute study, civilian workers’ inflation-adjusted pay is now lower than it was in December 2019.
However, if policymakers can keep price increases to a minimum, workers should fare well. According to Labor Department data, median wage growth was 4.8 percent on a 24-month annualized basis in July, up from 3.3 percent in January 2020. Last month, service workers saw gains that were nearly two percentage points higher than the overall average.
The topic came up during a recent meeting in Atlanta with Treasury Secretary Janet Yellen, who gathered senior executives from companies such as Delta Air Lines Inc. and Coca-Cola Co. to discuss inflation and the economy. According to a person familiar with the conversation, during private discussions, some executives bemoaned the fact that they still can’t fill open positions despite raising wages. Employers were unanimous in their belief that higher pay is here to stay.
Anyone who joins by the end of the month at a Starbucks location in Manhattan will receive a $200 signing bonus. Kroger estimates that the average hourly wage at its grocery stores will be around $21 by the end of the year, up from $15.50 in March. And the recruiting efforts have spread far and wide, with Church’s Chicken handing out coupon books with the words “Always Hiring.”
Honeywell International Inc. CEO Darius Adamczyk is giving some factory workers pay raises of more than 10%. He is attempting to raise prices in order to offset higher labor, material, and service costs. Companies rarely reverse increases in pay rates, so those higher wages are likely to stick.
Some businesses believe the tide is turning in their favor. McDonald’s Corporation CEO Chris Kempczinski stated that after raising wages by about 5% in its US locations, applications have increased significantly, particularly as the federal stimulus program has come to an end in some parts of the country. Workers, according to critics, have remained on the sidelines as a result of cash transfers and unemployment benefits.
Noodles & Co., a fast-casual restaurant chain, saw a 70% increase in applications in June versus April.
Labor Secretary Marty Walsh says the job market in the United States is healthy as people resume traveling and eating out, though he acknowledges that the delta variant poses a risk. Vaccinations and wage growth are encouraging people to return to work, though wages may have to rise, he said in an interview after the payrolls report on Aug. 6.
