We’ve been talking for some time about the tight job market faced by employers across the company. With the unemployment rate at a historic low, many jobseekers are having an easier-than-usual time finding a new job, or a first job, as employers struggle to find qualified employees.
At the same time, we’ve also been reporting that wage growth has been relatively stagnant. While employees have seen pay bumps when switching jobs, real wage growth has been sluggish for those remaining at their current position.
A Boost in Wage Growth
That may be starting to change, according to new data from ADP Research. According to ADP, “year-over-year wage growth clocked in at 3% to end the second quarter. This marks an uptick from the 2.3% growth a year ago and is consistent with a tightening labor market.”
The tightening of the labor market isn’t quite the same thing as decreasing unemployment, though. ADP reports that employment growth has continued to moderate. What this means is that there are fewer and fewer people available to take on new jobs.
For companies, this means that filling openings increasingly requires finding someone who is already employed—and likely paying that person more than he or she is currently making.
Big Impacts for Small Business
ADP notes that small businesses seem to be at a particular disadvantage in the current climate. “Early evidence suggests that small companies face the biggest challenge,” it writes. “Employment growth has decelerated rapidly at businesses with less than 50 employees, and these small firms are facing higher turnover rates as workers are increasingly finding better opportunities at larger firms.”
Small businesses may be less able to offer higher levels of pay to lure employees away from their current organizations. That requires thinking of other ways that employees can be provided with value in meaningful ways; flexibility, work/life balance, and opportunity for personal development and meaningful contributions are a few examples.
It’s not easy, but in this environment, it’s important for companies of all sizes to consider ways that they can become employers of choice.
Time for Salary Review
Things were already difficult for employers as the unemployment rate continued to dip, making it harder and harder to identify qualified candidates. Now, things may become even more challenging, as wages are finally showing signs of increasing. This means that employers will not only have to shell out more money to attract new employees but also need to increase salaries to keep the ones they already have.
Don’t assume that your pay practices are sufficient enough to address situations when employees may be pirated away. Take the time to conduct a market analysis to ensure your pay practices are continually competitive.