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Wage Growth

January 18, 2015 Leave a comment Go to comments

The unemployment numbers have been trending down now for a while.  We can debate the overall participation rate and quality of jobs, but regardless of those factors the rate is coming down and more of the employable people are employed than before.  For quite some time, we’ve had no real wage growth, but that may be starting to change.

For years recruiters have seen relatively stagnant salaries for all sorts of positions. Now, as the ingredients for rising salaries start to surface, many companies are trying to hang onto the lower numbers. Keep in mind that corporate profits have been very good since the downturn because companies were pressed to cut costs to the bone in order to be more profitable and the conditions were there for them to get the talent they needed without paying up.  Over the last several years companies have been getting by with as little human capital as possible to cut costs.  Where they needed employees for key roles the cost has been favorable.

There is only so much cutting that can be done and we are probably near the maximum.  To grow going forward will likely take real business growth and more human capital, not just cost cutting.  Businesses, by nature, want to grow.  So the next move for the business world in general is to grow and the only way to do that in a real way will be to bring in talent.  That should create a situation that we have not seen for quite some time where there is pressure to pay higher salaries.  It’s a slow process.  It takes a lot of not getting what you want because of salary and re-evaluating comp.  Not for a business or two, but for many businesses in all industries.  Once a good number of them start to pay higher in order to grow, the pressure increases on everyone else.  

Recruiters are on the front line in this process.  If wage growth is coming we’ll see more candidates turning down offers for better competing offers.



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