U.S. companies across a range of industries seek to gain an edge in an unusually tight labor market by increasing pay.
Published Aug. 15, 2023 by Jim Tyson, Senior Reporter
- Roughly three out of every four CEOs (74%) plan to boost wages by at least 3% during the next year, with most top executives identifying wage growth as the sharpest spur to inflation during the coming 18 months, according to a quarterly survey by the Conference Board and Business Council.
- “Attracting qualified workers remained difficult for the majority of companies,” Conference Board Chief Economist Dana Peterson said in a statement.
- “The competition for talent is fierce,” she said, noting that two out of five CEOs “are maintaining the size of their workforce — a sign of labor hoarding in an extremely tight labor market.” The two-week survey of 127 CEOs concluded July 24.
U.S. companies for months have faced challenges hiring and retaining workers, with unemployment falling last month to 3.5% from 3.6% in June and available jobs far exceeding the number of workers seeking employment, according to the Labor Department.
Aiming to attract and retain workers, companies increased hourly wages after inflation by 0.3% last month in the fifth consecutive month of pay hikes. Yet demands for higher pay persist — inflation-adjusted hourly earnings have risen only 1.1% during the past 12 months amid the worst inflation in 40 years.
“There’s still a lot of pressure upwards” on wages, HireQuest CEO Richard Hermanns said during a second quarter earnings call on Thursday, noting “a constant shortage” of workers.
“I was flying through Minneapolis the other day, and you’ve got a restaurant in the middle of the airport closed until two o’clock because they didn’t have enough people,” Hermanns said. HireQuest provides temporary staff services.
CEOs at a broad range of industries — from financial institutions, to cinemas, to transportation firms — are using layoffs, technology and other streamlining to cope with rising labor costs, several top executives said during recent Q2 earnings calls.
UPS reduced compensation and benefits by $205 million during the second quarter by trimming management staff by 2,500 year-over-year, CFO Brian Newman said in an earnings call on Tuesday. The cuts helped blunt a 6.5% increase in average union wage rates during recent labor negotiations, he said.
“One thing that was very important for Teamsters leadership was to front-load some of the wage inflation,” UPS CEO Carol Tomé said. “We agreed to do that, so that does put a little pressure on the margin.”
“We’ll have a bit of pressure for the next year — June to August of next year — but then inflation is very manageable,” Tomé said.
TFI International, a transportation company, recently agreed to a 3% average annual salary increase for five years after cutting its year-over-year shipping costs by 15% compared with last year, CEO Alain Bédard said during a quarterly earnings call on Aug. 1.
ARKO, a convenience store operator, faced a 6.5% rise in personnel costs during Q2 compared with the same period last year, CFO Donald Bassell said during an earnings call on Tuesday.
“We, like others in the industry, have faced wage inflation,” Bassell said. “Our overtime has decreased a tremendous amount and that goes towards, I think, quality of life that we’re getting with people and also getting temp services.”
Still, “the biggest unknown is going to be labor,” he said.
Cinemark Holdings, an operator of cinemas, faced a 12% surge in global salaries and wages during the quarter, on a year-over-year basis, CFO Melissa Hayes Thomas said during an Aug. 4 earnings call. Yet such costs fell 1.6% as a proportion of revenues thanks to higher attendance and streamlining.
“We are still seeing some wage rate pressure,” she said, pointing to higher minimum wage requirements in some states rather than a “labor market dynamic.”
The increase in pay and retirement savings at many companies has buoyed performance at Principal Financial Group, a provider of insurance and manager of retirement assets.
“We are uniquely positioned, that when inflation plays through, especially when it plays through on salary levels, we do get benefits,” Principal CFO Deanna Strable said during a July 28 earnings call. “That plays through from a revenue perspective.”
Yet Principal is also buffeted by labor market headwinds. “We have had to increase salaries because of that inflationary pressure and war for talent,” Strable said.
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Source: HR Dive