Wage increases are not enough to combat climbing inflation

FRI, JUN 17, 2022

TECH, TRANSFORMATION AND THE FUTURE OF WORK

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The Federal Reserve raised interest rates by 0.75 percentage points this week – the largest hike in nearly 30 years. This significant increase comes as the Fed tries to quell inflation without sending the economy into a recession. Although the Fed's action will likely bring prices down, the relief won’t be felt by consumers immediately.

While the economy is not technically in a recession, it is starting to feel like it for many Americans. Although wages have increased over the past year, it is not keeping pace with inflation. The increase in rent, food and gas prices is making it difficult for many workers to cover their expenses. In April, 61% percent of consumers reported living paycheck to paycheck and that number will likely increase as prices continue to remain high and borrowing costs go up as well. Surprisingly, 36% of employees earning $100,000 or more are also living paycheck to paycheck, doubling from 2019. In addition, a quarter of Americans are delaying retirement because of disrupted savings from this recent economic upheaval.

The effects of high inflation can be felt throughout the country and are also being factored into workplace strategies including those putting off retirement for now, workers asking to stay remote longer to offset high gas prices and a closer look at what standard-of-living wage increases mean in this current environment.

For more on the world of work, check out our Key Stories roundup below.

Until next time, stay safe, stay healthy and stay in touch.

Amid record inflation and a labor market with two open positions for every worker, the average annual salary increase reached 4.8%, the highest pay bump in decades for employees. And it’s still not enough, according to many companies. More pay raises are on the way at the mid-year mark.

That’s according to a new survey of decision makers, including chief human resource officers and corporate boards, at companies across the economy conducted by compensation consulting firm Pearl Meyer in May.

Burnout was cited as one of the top three reasons for why young people are leaving their jobs, according to the global survey which found that some 40% of Gen Zers (ages 19-24) and 24% of millennials (ages 28-39) would like to leave their jobs within two years.

This will continue to be “a significant retention issue for employers,” Deloitte wrote, as some 46% of Gen Zers and 45% of millennials surveyed said they feel burned out due to their work environments.

As the return-to-office debate drags on, some executives are sending the message that long-term flexible work will come at a price, namely losing out on opportunities to get ahead.

Leaders have the most power to stop proximity bias by being conscious of it and changing up processes, like by letting remote participants speak first during hybrid meetings. But some will still default to thinking in-person work gives the best results, so you’ll need to speak up about keeping your remote flexibility while also “showing up” in a way they’ll understand.

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As inflationary, labor and supply pressures converge, what capabilities will companies need to increase economic resilience and stay relevant with consumers?

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