Wage Growth Outlook Remains Low But Talent Prepares to Move

Friday, January 18, 2013

On January 16th, Bloomberg BNA released its latest quarterly Wage Trend Indicator (WTI) numbers indicative that private sector employees can expect continued low wage increases. Designed to be a leading, rather than lagging indicator of private sector wage growth, the WTI is projecting growth at around 1.8%. Not an encouraging forecast for most employees. Kathryn Kobe, an economist and consultant who supports the Bloomberg BNA’s WTI database, commented, “The latest WTI suggests there is still too much slack to support most workers' demands for higher wages."

While the WTI forecast may seem encouraging for employers due to the relative low cost of labor, the reality is that low wage increases may also be a predictor of the pent-up demand for employees to seek any opportunity for higher wages. The unemployment rate has remained steady at 7.8% or approximately 12.2 million workers even after adding 155,000 jobs in December, 2012, according to data released by U.S. Bureau of Labor Statistics on January 4th. That does not mean that employees are not thinking about changing jobs.

In a 2012 collaborative effort between PARADE magazine and Yahoo! Finance, 60% of the 26,000 workers surveyed reported they would chose a different career over their current one.  FPC, an executive search firm, reported that upwards of 80% of current employees are prepared to seek new employment prospects as a more positive economic outlook develops.  The BBC News is reporting that manufacturers are beginning to rethink off-shoring and manufacturing jobs are being returned to the US as overseas labor costs raise, US energy costs fall, and as US worker productivity increases.  The first installment of the 2012 Kelly Global Workforce Index, “Acquisition and Retention in the War for Talent” revealed that workers have endured “unprecedented economic turmoil”, even so, “they are restless." Most are discontented with employment and are proactively seeking “new opportunities.” Even workers who are satisfied with their roles are searching for greater involvement and “meaning” from their employment.

The U.S. Bureau of Labor Statistics reported that in December, 22 states reported a decrease in unemployment rates, 16 states saw increases, and 12 states had no change. Furthermore, median weekly earnings in the 4th quarter of 2012 were 1.4% higher than in the 4th quarter of 2011. Coupled with adding 155,000 jobs in December, 2012 the news points to continued indications that the labor market is strengthening.

Combining a stronger labor market, higher wages, and a high proportion of workers willing to change employers will result in some employers literally struggling to keep the workforce they have. Employers who are not prepared to deal with such a dynamic environment will find that valuable talent will have moved on before they have a chance to make a counter offer. Organizations will need to be diligent in their efforts to measure the likely hood that workers are eager to seek new job opportunities. One way to lessen the prospects that top achievers will jump ship is for employers to create internal opportunities which both challenge and reward its top talent.