Mark it down. Heres the big idea for 2015: Well all get a raise. Finally. One of the outstanding features of this deeply unsatisfying recovery, which began in July 2009 and has just entered its 66th month, has been the yawning disconnect between profits and growth on the one hand, and typical employee compensation on the other. Simply put, we’re making a lot more pies in the U.S., but we seem to be delivering them all to Park Avenue. Pick your data point. The median family income in 2013 was $51,939 — essentially unchanged from the year before and down eight percent in real terms from 2007. In 2013, after-tax corporate profits were a record 10 percent of GDP. In October, average hourly earnings were up only 2 percent from the year before. A lot of factors come into play — the failure to raise the national minimum wage, a slack labor market with legions of underemployed people, global competition. But the real factor, I’d argue, is a change in norms. Too many companies simply came to believe that they should never raise wages, that life is a zero-sum game in which every penny given to employees in compensation is one less penny for shareholders, that their businesses would suffer irrevocable damage if they were to loosen the reins on compensation. And they could get away with it because the labor market was so feeble. Each of these conditions is changing. The ground has been slowly shifting over the past 12 months. And next year, many of us are likely to get higher wages. First, the floor is rising. The federal minimum wage remains stuck at $7.25. That’s not going to change next year. But there has been a great deal of activity in states and cities. The minimum hourly wage in California, where about 12 percent of Americans live, rose from $8 to $9 in July, and is slated to rise to $10 by 2016. In November’s elections, voters in Alaska, Arkansas, Nebraska, and South Dakota — each one deeper red than the next — approved measures raising the minimum wage. On January 1, 2015, the minimum wage in nine states where the wage is indexed to inflation — including highly populous ones like Florida, New Jersey, and Ohio — will go up. Chicago’s city council this week passed a bill that would require the minimum wage in the Windy City to rise to $13 by 2019. Second, companies are both responding to these changes and acting of their own volition. Increasingly, large employers — especially in consumer-facing service companies — are realizing that keeping wages as low as possible is bad for business. It’s bad optics. It reflects poorly on your brand, and can inhibit the ability to expand into new markets and retain employees. McDonald’s and other fast-food chains continually grapple with the negative attention of strikes and labor actions by workers demanding higher pay. So out of a concern for public relations, or as a way to differentiate brands in a competitive marketplace, many large companies have come out and raised wages. Last February, the Gap announced it would raise its internal minimum wage from $9 per hour to $10 per hour, a move affecting 60,000 workers. Guess what? Applications to work there have increased. IKEA in June announced it would raise its average minimum wage by 17 percent, to $10.67 an hour. In October, Walmart, the nation’s largest private sector employer, said it foresees a future in which no employee will work for the federal minimum wage. With each passing month, more companies will find that they have to boost wages because laws require them to, and because the competitors who set benchmarks are doing so. There’s a third factor that should start pushing wages higher in 2015: the labor market is getting tighter. After 66 months of economic growth, and 57 straight months of job growth, with the economy adding more than 200,000 positions per month, the job market is tilting slightly in the favor of job-seekers. In November, according to the Bureau of Labor Statistics, there were 139.7 million people with payroll jobs — the highest on record. At the end of September, there were 4.7 million job openings in the U.S. — up 787,000 from the year before, and the highest level seen since early 2001. It all adds up to more competition for employers in a range of areas — from computer programming to teachers. Human resources and talent acquisition managers — at all levels — will increasingly realize that if they really want to fill a position, they may have to offer higher pay. But it will require more than just a bunch of laws or structural forces to push through higher pay. Ultimately, it comes down to individual decisions. And we all have a part to play. Managers and business owners have to learn to adapt to a world in which the floor is rising — and to stop looking at wages as one among so many undifferentiated inputs. We wouldnt want to come to work next year to make less than we did last year. Why should we expect our employees to do the same? And whether looking for a job, or considering shifting to a new one, we all have to screw up our courage. Whenever somebody approaches me with a job offer, or an assignment, or a book deal, there are two questions I write down and force myself to ask. (1) How much does it pay? (2) Can you pay more?
Posted on: Tue, 23 Dec 2014 02:39:28 +0000
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