What to Expect from the Labor Market: Recruiting, Wages and Legislation

By Susan Palé, CCP, Vice President for Compensation – Affinity HR Group, Inc.

Inflation. Inflation. Inflation. We not only hear that word 15 times a day, but we also experience it every day — at the gas pump, supermarket and your morning coffee and bagel purchase.

Many economists are concerned that the interest rate increases approved by the Federal Reserve will slow economic growth and cause a recession. It’s too soon to know and although the labor market remains strong, there are some signs of changes ahead.  

Here are some things you need to know:

Recruitment and Unemployment

On July 8, the United States Department of Labor (USDOL) issued its Job Openings and Labor Turnover Survey (JOLTS Report) for June. 

Job openings have declined slightly. The biggest decreases in openings occurred in the professional/business services, durable goods manufacturing, and non-durable goods manufacturing sectors. During the same 30-day period, hire and separation numbers remained unchanged.

The USDOL also reports that all jobs lost to the COVID-19 pandemic have now been recovered.

There are some changes to note here. The job opening numbers have — until now — been steadily increasing as have the hire and separation numbers. It’s too soon to tell if the June numbers are a “blip” or indicative of more changes to come.   

The U.S. unemployment rate was 3.6% in July 2022. That’s low, but not as low as most of Minnesota, which has 6 metropolitan areas with unemployment rates less than 2%. Mankato and Rochester reported unemployment rates of only 1.3%.

Tips for employers:

• Identify the best resources to help you stay informed about labor market activity in the market(s) where you operate and consult those resources regularly.
• Anticipate continued difficulty recruiting, especially entry-level candidates.
• If raising pay is necessary to hire new talent, review pay levels for current, experienced employees to ensure internal equity.
• Streamline your application process.  Many candidates report “giving up” trying to apply online because of a confusing/convoluted/redundant application process.

 Wage Growth

The Conference Board recently reported that real wages are on track to increase 3.9% in 2022. That would be the largest increase since 2008. And employees in all roles — executives, managers, professionals and hourly — are expected to receive similar increases.

Wage growth will also vary by geography. In areas with low unemployment and high demand for workers, expect wages to rise more sharply and quickly. In areas with high living costs, wages will rise to keep pace with those costs, which may in turn cause employers to raise prices — perpetuating the “wage-price” spiral that currently exists.

Despite high wage growth, the current inflation rate of 9.1% (the highest recorded in 40 years) results in negative wage growth for many employees. What that means is this: For an employee making $40,000, the individual’s real income is reduced to $36,664 when the current inflation rate is considered.

Tips for employers:

• Develop and implement a long-term salary planning process that addresses current and anticipated labor market issues.
• Be aware of differing costs in different labor markets.  This is critical for employers doing business in multiple locations.
• Review current pay policies for competitiveness in recruiting market(s) and anticipate the need to increase wages to recruit and retain.
• Consider other types of salary increases (e.g., equity increases, bonuses, special incentives) to supplement/replace the standard yearly increase of 2% to 3%.

Minimum Wage

The federal minimum wage remains at $7.25, and is not likely to be raised any time soon. 21 states currently have a minimum wage of $7.25.

 As always, states and municipalities are well ahead of the federal government in raising wages to address costs of living and labor. And a lot of these changes take effect mid-year. Some of the states that recently enacted changes include CA, CT, DC, IL, MD, MN, NV and OR. Changes in FL will take place on September 30.

Tips for employers:

• Be aware that minimum wage changes may not be state-wide and may not take effect on January 1.
• Understand that even though a location may have a specified minimum wage, prevailing wages for specific jobs in specific markets may be well above these minimum levels.
• Keep informed of what’s happening at federal, state and local levels in all the locations where you do business.

Legislative Outlook

The current Democratic administration continues steps to advance its workplace policy agenda prior to the 2022 midterm elections. The proposed 2023 DOL budget includes major funding to expand Registered Apprenticeship opportunities, funding to allow the Occupational Health and Safety Administration (OSHA) to rebuild its rulemaking and enforcement capability and expand its whistleblower protection program, and increased funding for the Wage and Hour Division to more aggressively enforce rules regarding the misclassification of employees as independent contractors.

The United States is one of the few western countries that doesn’t offer paid family leave to employees. A federal proposal for paid family leave, originally included as part of the Build Back Better Act, is being considered by both houses of Congress as a stand-alone proposal but is not expected to advance.

11 states and the District of Columbia now offer some type of paid leave for employees. Federal employees are also eligible for up to 12 weeks of paid leave under the Federal Employee Paid Leave Act (FEPLA) of 2020.

Tips for employers:

• Consider subscribing to Affinity HR Group’s HR Support Plan which tracks state legislative updates that affect workplace policies and practices (http://www.affinityhrgroup.com/hrsupportplan).
• Identify additional resources to help you stay informed of changes/new requirements at the federal, state, and local level and use those resources regularly to stay informed.
• Increase focus on compliance. Expect increased enforcement of OSHA, Office of Federal Contract Compliance Programs, and DOL Wage and Hour Division standards and rules.

Susan Palé is a contributor for Affinity HR Group, Inc., IIAV’s affiliated human resources partner.  Affinity HR Group specializes in providing human resources assistance to associations such as IIAV and their member companies.  To learn more, visit www.affinityHRgroup.com.

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