Much of today’s COVID talk is about public health, first, and the economy, second, and rightfully so. But there’s a third topic that’s heating up: COVID’s effect on wages. Let’s take a look at the current state and where we could be heading next.
The CARES Act
The pandemic triggered record-high unemployment and the $2.2 trillion Coronavirus Aid, Relief, and Economic Security Act (CARES). The act changed lives by providing income and stimulating the economy, delivering checks up to $1,200 to individuals and expanding unemployment insurance, including adding $600 weekly to state checks. This means that some Americans have more income now than they did in their pre-COVID roles, encouraging them to pause their job searches indefinitely.
The future of the CARES Act is up in the air. While the $600 weekly payments are scheduled to end on July 31, they could be extended, at least to some degree. And COVID test results, economic health indicators, and political back-and-forth in D.C. could lead to a changing act—and changing labor market—for some time.
Current Wages
The natural question is, what has the CARES Act meant for wages, and what will it continue to mean assuming it’s extended? Depending on geographic area, industry, and other factors, it’s a mixed bag of pay staying flat or growing. As far as the growth goes, if you’re an essential services business looking for talent, or a non-essential services business preparing for recovery, the CARES Act has made it more difficult for you to find talent. Remember, that talent can currently remain unemployed quite comfortably and might also be reluctant to re-join the workforce and risk becoming ill—especially without better than average pay. That’s precisely why some businesses are upping their offers.
Some simple math illustrates this point well. A worker earning $15 per hour in a 40-hour week prior to the pandemic, made around $30,000 per year. With the act, that same person could be making $20+ per hour and the equivalent of around $40,000 per year, while opting out of the workforce. So, if your company is attempting to hire for $15 per hour, it might be more difficult than it was this time last year. And while paying significantly more per hour, say $19, isn’t easy to absorb, landing fitting talent should translate to more consistent productivity.
Adecco’s Wage Data
In addition to smaller talent pools and challenging hiring (despite relatively high unemployment rates), retention for both temp and perm talent is an ongoing issue. There’s a direct correlation between hourly pay and turnover, as evidenced by our own internal client data. Take a look at the numbers:
For 100 employees…
$11.47 per hour pay = 12.3% monthly turnover = $73,800 monthly turnover costs
$12.48 per hour pay = 9.9% monthly turnover = $59,400 monthly turnover costs
$14.06 per hour pay = 6.2% monthly turnover = $37,200 monthly turnover costs
It also goes without saying that employee morale and productivity are a big part of this equation and correlate to turnover as well. Generally speaking, the more turnover, the more interruption in services and the more potential for a disgruntled, skeptical workforce.
This data will hit home especially hard when the virus is increasingly contained, the entire economy reaches a healthier point, and the competition for talent intensifies—further compelling companies to offer better pay and other incentives to land workers quickly and keep them around.
Your Next Move
Without knowing details about your company, it’s impossible for us to offer a clear solution, but that doesn’t mean we can’t offer advice and tell you what we’re observing. Here’s what Sara Gordon, our Head of Account Management for National Accounts, and Amy Glaser, our Senior Vice President of the Enterprise Division, have to say.
Sara: “Clients are using a number of different pay strategies to entice and retain workers. In addition to $2 to $5 per hour increases to base pay, we’re also seeing clients offer significant weekly bonuses for perfect attendance.
We recommend that companies consider all the ‘levers’ at their disposal at the moment. If a company is unable to increase pay, it’s important to look at how easily and quickly people can start a job. Speed is key right now…
Companies must ensure the health and safety of their people remains their top priority.”
Amy: “We’re seeing clients raise hourly pay as well as offer bonuses—both sign on and retention. We’re also seeing some clients offer ‘bench pay’ for critical roles where there may have been a layoff, so that workers will hopefully return quickly.
As recruitment becomes increasingly difficult with the in-home quarantine and social distancing period, I anticipate that wages will continue to rise (especially in the blue-collar space), as candidates are becoming more and more scarce.”
For more of what Sara and Amy have to say, take a look at the full interview on COVID’s effect on wages and hiring requirements in necessity goods.
To have us take an in-depth look at your market, your competition, and pay rates for relevant positions, get in touch with our team.