502 - Wages and the War For Talent
Episode Title: Wages and the War For Talent
Why aren’t the wages of current employees keeping pace with the offers made to new hires? Here’s why this is happening more and more, next on The Perna Syndicate.
Ep 502 show:
Welcome to The Perna Syndicate! There’s been plenty of media attention focused on the Great Resignation, but one little-known factor is that people are increasingly looking for new jobs as a way to get a raise.
Like it or not, switching jobs is often the best way to achieve a meaningful increase in salary. The Joblist survey I mentioned yesterday found that 58% of employees who got raises last year received pay increases of only 5% or less. By contrast, by switching to a new job, employees could grow their pay by 10%, 20%, or even more.
So why do wages within an organization tend to move more slowly than the market overall? There’s a couple reasons. Performance reviews and pay evaluations happen just once, or at most, twice per year within most companies. Hiring and personnel budgets are also often set on a similar yearly cycle.
Then, when you’re dealing with collectively bargained situations like union contracts, the feedback period could be even longer, sometimes taking multiple years to adjust rates.
The result is that when the labor market changes rapidly as it has during the past few years, employers are not likely to adjust the pay of their existing employees as quickly as the market moves for new hires. Wages are a big player in the War for Talent.
So, is the answer to just bump everyone’s pay? Not so fast. On the next episode of The Perna Syndicate, we’ll talk about the surprising reason that that strategy can backfire—big time. Stay tuned and we’ll see you then!