gRand Rapids-area employers have raised wages an average of 5.2% this year, an amount that exceeds historic norms as companies adjust wages to attract and retain people in an extremely tight labor market.
The wage increases for 2022 compare to the average wage increases of 4.4% granted by employers in the region in 2021 across all sectors, according to The employers’ association, a nonprofit human resources organization based in Grand Rapids that annually surveys its members to assess salaries in the area. The resulting report provides an indicator of market norms and trends, at least among association members, for pay rates at a time when labor markets are tight.
Through 2021, the Employers Association’s annual wage survey found that average wage increases in the Grand Rapids area had been lower, including 2% in 2020.
The higher compensation adjustments began when employers raised wages to bring in new workers or bring in people who left the workforce during the early months of the COVID-19 pandemic, said Jason Reep, president. of the Employers’ Association.
One difference the association saw this year was that the average increases in pay levels were for both entry-level positions and existing staff, Reep said. Over the past two years, employers have primarily made the largest wage adjustments for entry-level jobs.
“It could read, ‘Hey, we need to make sure we’re paying attention and bringing fairness to other roles in the organization as well. It works to build equity beyond that entry level,” Reep said. “Entry-level prices have still increased. They have not stopped increasing, they have just increased at a slower rate than the others.
The Employers’ Association’s 2022 salary survey included data from 292 organizations, mostly in Kent and Ottawa counties, for 18 major job groups, such as production or office, and 348 specific jobs.
The COVID factor
The 2022 wage increases came in a labor market that was tight long before the pandemic and has continued to tighten ever since. Michigan’s civilian workforce remains below pre-pandemic levels with low statewide unemployment.
As of September, the state’s labor force of more than 4.9 million people was nearly 80,000 below January 2020, according to the Michigan Department of Technology, Management & Budget.
The state’s unemployment rate for September was 3.7%, down from 4% in August and 5.2% in September 2021.
Locally, the Grand Rapids area had an unemployment rate of 3.2% in September, down from 3.9% a year earlier. The civilian workforce in the Grand Rapid Metropolitan Statistical Area surpassed pre-pandemic levels last spring and was 583,500 in September, up 4,000 people from January 2020.
Labor challenges have led many employers to raise wages to attract and retain workers, Reep said.
“What happened during COVID is because so many people were leaving the workforce at least temporarily, some permanently, it became more difficult to find people to fill certain positions, and so we have seen rates increase due to the impact of COVID,” Reep said. However, he noted that “there are a lot of factors” driving up wages and “it’s not just a COVID thing.”
As civilian labor nears or returns to pre-pandemic levels in state markets, Reep expects some easing in wage inflation, albeit tight labor markets will likely persist.
Based on salary analyzes the Employers’ Association has conducted for members, the size of salary increases projected for 2023 have eased somewhat, but they remain larger than in the years before the pandemic, Reep said. . He estimates wage increases for next year could average about 4% among Grand Rapids-area employers as the economy cools following interest rate hikes to cope. to high inflation.
“It’s still difficult. Let’s not oversimplify this, but it’s not as difficult to find good qualified people for particular roles and they may not require as much salary adjustment,” Reep said. “The challenge is that employees have come to expect a certain rate of pay. They say, ‘I don’t know if I’m going to go back there to work for less. I will keep this. I don’t think it will continue to rise at this particular rate (5.2%). Like all things in the world, it’s going to increase on a yearly basis, it’s just how much it’s going to increase.
Raising the bar for entry-level jobs
A stark example of the accelerating pace of salary increases comes from data from the Grand Rapids office of Express employment professionalswhich conducts its own market wage survey.
Before the pandemic, 28% of the entry-level jobs the company held paid less than $16 an hour, said David Robb, co-owner and general manager of the Grand Rapids office of Express Employment Professionals. In October of this year, only 5% of entry-level positions the company placed in manufacturing and distribution companies paid less than $16 an hour.
“Everything goes up. We keep expecting it to slow down and employers keep saying, “Oh, we can’t raise any more”. It feels like we’ve been saying this for a year, but so far it hasn’t really slowed down. We continue to see things steadily increase,” Robb said.
From the start of 2020 to present, the entry salary for positions held by Express Employment Professionals for clients has increased by about 25% to 35%, he said.
Additionally, many workers today view $16 an hour as the “absolute minimum” rate of pay they’ll accept with an entry-level job offer, Robb said.
“It’s really classic supply and demand if you look at it from an economic perspective. There is more demand for labor than there is supply, so companies keep trying to raise wages to be competitive,” Robb said. “On the other hand too, the worker’s expectations have also changed. They know it’s a market for job seekers.
More frequent adjustments
Express Employment Professionals has seen employers make semi-annual or quarterly wage adjustments to retain staff and prevent them from moving elsewhere for better paying jobs, Robb said. Employers are also reassessing their benefits to retain staff, he said.
Coming out of the pandemic, the Employers’ Association has also seen an increase in the number of companies allowing greater flexibility to work remotely, offering discretionary bonuses, attendance bonuses or profit sharing, Reep said. Employers are also increasingly emphasizing workplace culture as a lure for employees, he said.
At periodic human resources roundtables the association holds with its members, compensation and benefits “are always a topic” as professionals try to identify creative ways to retain employees without simply resorting to higher salaries, Reep said.
“They’re really trying to say, ‘How can we essentially deliver more value if we just can’t make too many additional compensation adjustments?’ he said. “‘What can we do to add more value to keep people in the organization?'”
As tight labor markets persist, employers should continue to review compensation and benefit levels with a focus on internal pay equity among employees and external competitiveness in the marketplace with other employers. , said Reep.
By regularly reviewing compensation, employers can avoid going “haywire” with the market as they compete for employees, Reep said. The trick is to balance their wage competitiveness without hurting the company’s cost structure by raising wages too quickly.
“People really need to catch up on this,” he said. “You don’t want to be reactionary.”
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