What's Keeping Wages Stagnant?


If your business is like many others, there hasn’t been much movement in the amount budgeted for salary increases. According to the WorldatWork Salary Budget Survey, the average salary budget increase in the US in 2018 was 3.1% and the projection for 2019 didn’t show much movement from there. However, this isn’t isolated to just the last few years, workers have seen almost a decade of flat pay raises. With the unemployment rate at historic lows and considering the competition for talent, what are some of the reasons wage raises have been stagnant?

  • Increased Spending on Benefits: A survey conducted by the National Business Group on Health conducted a survey which showed that large US employers are predicting their health care costs will rise by about 6% for 2020. Small and midsize businesses often pay higher plan premiums, sometimes paying between 8% to 18% more than larger companies. In both cases, these increases can potentially leave less room in the budget for raises.

  • Company Size: While they may get hit harder by healthcare increases, small and mid-size businesses have been a little quicker when it comes to salary increases. Smaller and mid-size companies are able to look at employees on a case by case basis. Larger companies are reluctant to make increases across the board, especially when raising the salary on a particular job title would impact the wages of potentially thousands of employees.

  • A Changing Workforce: Employers are more willing to think outside the box when it comes to hiring employees. For some jobs, companies are not limited to hiring workers in the US and their talent pool can be global. For other jobs, companies have realized they may not need a full-time permanent employee for certain projects.

  • Fear of a Recession: After many years of growth, there is a sense of economic anxiety that has come over employers. If we do enter a recession soon, companies don’t want to feel like they are overpaying salaries.

Because salaries have remained stagnant, there is a tendency for employees to move to the next opportunity where they can increase their salary. Companies can’t just be satisfied in recruiting a new employee to a position, they must be focusing on retention. There is a delicate balance between salary and benefits, but employees continue to value working for a company with a healthy company culture, a good work-life balance, a robust benefit package, and employee development programs. Create career pathways within your company so employees don’t feel stagnant.

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