As the Economy Continues to Improve, Employers are Making Pay-rate Strategies a Priority


The continued economic acceleration is creating new pay rate dynamics for employers and employees across metro Detroit and the U.S. Record-low unemployment rates mean many employers now have to consider doing more than they have before to keep or attract talent. Employees, on the other hand, are enjoying new negotiating power in a talent market where companies struggle to fill open positions, which is potentially making things decidedly rosier for workers, assuming they take advantage of the situation.

According to a recent CNN Money article, “Unemployment is the lowest since 2000, and the United States has added jobs every month for more than seven years, the longest streak on record. The economy has been growing, albeit slowly, since 2009, making this expansion the third-longest in U.S. history.”

The February jobs report from the Bureau of Labor Statistics paints a remarkable picture as well – 313,000 jobs were added, and the number of people participating in the labor force increased to 63 percent from 62.7 percent, an astounding 806,000-person increase. These are signs of a healthy economy. As CNBC points out, “The U.S. economy did more than give jobs to 313,000 [people] in February — it brought nearly three times that amount off the sidelines.” What’s encouraging about more people re-entering the labor force is that they were all able to find employment. However, this creates yet another situation where employers are vying for workers, and they must be able to compete.

The robust labor market continues to demand workers put pressure on the current wage structure, especially for lower-skilled workers who have seen the slowest growth in wages.

Traditionally, wage increases have varied based on educational attainment. In other words, workers with four-year degrees and skilled workers are paid based on market supply and demand. However, lower skilled workers’ wages have remained stagnant due to their employers’ inability to pass along the cost increase to their customers.

Some companies have started to scale their businesses to meet customer demands by implementing automation wherever possible to create and maximize efficiencies. Forward-thinking companies, many located right here in metro Detroit, have started to evaluate and implement wage increases for lower skilled workers as a means to retain existing workers and attract those re-entering the workforce. As this recruiting tactic gains momentum, it’s anticipated that wages for this tier of workers are expected to rise well into 2018.

As companies begin to evaluate their wage structure, it’s important to point out that employers need to be aware of what the market commands for certain positions in their industry, and more important, what their competitors are paying, particularly those that require workers with similar skill sets. Market data analysis will often provide those answers and will help employers overcome any internal misconceptions about what workers should be paid.

With the economy roaring and workers jumping back into the game, employers can’t rest. As 2018 progresses, employers should keep a close eye on compensation and make the effort to understand the type of compensation that is needed to get workers to make a move or attract new workers. Investing in your current workforce and future employees are data-driven business decisions that should pay big dividends in the years ahead.

About the Author

Jack Van Tiem is the Detroit territory vice president for Kelly Services in Troy, a global leader in providing workforce solutions. He oversees the staffing and business solutions operations for Kelly throughout metro Detroit, with a focus on staffing for automotive, manufacturing, retail, financial services, and technology.

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