A recent report by the National Association for Business Economics showed nearly 1 in 4 firms raised wages and salaries for workers in the third quarter. This indicates that wage growth has slowed as past trends have shown steady increases since January. While wage growth has not expanded as quickly, companies may face pressures to increase pay for skilled workers to keep up with economic growth and retain their talent.
The majority of the districts within the Federal Reserve Bank had an increase in consumer spending with employment continuing to expand, according to the Beige Book for October. While the job market has not seen many changes since the last Beige Book, according to the Fed companies are beginning to notice key issues arise from the lack of wage growth.
“Employment continued to expand at about the same pace as that reported in the previous Beige Book,” the Fed wrote in the report. “Most districts reported that some employers had difficulty finding qualified workers for certain positions. A number of districts characterized overall wage growth as modest, but reported upward wage pressures for particular industries and occupations, such as skilled labor in construction and manufacturing.”
Noting certain districts having trouble with finding the labor they need, the Fed said Chicago employers had the challenge of finding skilled labor in the construction industry with Dallas also experiencing obstacles in finding workers for construction and engineering projects in the petrochemical sector.
With the prospect of a labor shortage on significant sectors of the economy, companies may see slower revenue growth and other struggles that could reduce profits in the fourth quarter. Firms should determine whether their organization may be at risk for a labor shortage and figure out how to remedy this.
Here are two signs of a skills shortage:
Workers are looking to join other companies
As workers often connect pay with job satisfaction, employees offered only small wage increases may look to exit the company. With the job market improving, rival firms may boost wages and salaries to appeal to a limited pool of talent. Employees with specialized knowledge of a niche industry or have unique skills will often get multiple offers with competitive salaries. Current employers should determine whether they are paying their workers the market value for their skills.
Lower productivity at a higher cost
While companies may be hesitant to either hire more workers or raise pay until they are confident the economy is stable, not raising wages in time could affect productivity. When workers react to low pay, they may not be as motivated to work as other employees who are being paid at the market value for their skills, experience or expertise. Because workers are not contributing as much, companies may be paying a higher price for labor due to productivity losses.
Companies seeking skilled workers should evaluate employees based on their needs as an organization. This is is the same issue for employers in the U.K., who are finding that they need workers with skills in communication, which is integral in sales and marketing, The Guardian reported. The Federation of Small Business (FSB) said companies often need these skilled workers in sales and marketing because smaller companies do not have the time or resources to harness these special skills needed for these capabilities.
“A determination to succeed and softer employability skills such as communication can be as necessary to grow in business as sales and marketing expertise,” said John Allan, FSB National Chairman, according to The Guardian. “With the numbers of firms aspiring to grow at an all-time high, making sure these skills can be found in a business is crucial for these aspirations to be realized.”
Companies looking to increase salary increases for workers in sales or other industries should determine whether they should incorporate improved incentive compensation in their rewards programs to keep employee motivation up.