Employers paying workers more, but not as much as prices are going up

Late last week, the Bureau of Labor Statistics released their Employment Cost Index report for March. And it showed that as the 1st quarter of 2022 ended, worker-related costs were going up along with prices in the first 3 months of this year.

Compensation costs for civilian workers increased 1.4 percent, seasonally adjusted, for the 3-month period ending in March 2022, the U.S. Bureau of Labor Statistics reported today. Wages and salaries increased 1.2 percent and benefit costs increased 1.8 percent from December 2021.

Some of that jump in compensation costs for benefits is likely due to a change in rates associated with the start of the new year for health care and other bennies. But 1.2% wage growth in 3 months translates to nearly 5% for a full year, and it continues a higher (nominal) level of growth than we were seeing before President Biden took office.

Compensation costs for civilian workers increased 4.5 percent for the 12-month period ending in March 2022 and increased 2.6 percent in March 2021. Wages and salaries increased 4.7 percent for the 12-month period ending in March 2022 and increased 2.7 percent for the 12-month period ending in March 2021. Benefit costs increased 4.1 percent over the year and increased 2.5 percent for the 12- month period ending in March 2021.

But what's also up over the last year is prices, and that 8.5% increase is well above the added costs that workers have caused for employers.

Compensation costs for private industry workers increased 4.8 percent over the year. In March 2021, the increase was 2.8 percent. Wages and salaries increased 5.0 percent for the 12-month period ending in March 2022 and increased 3.0 percent in March 2021. The cost of benefits increased 4.1 percent for the 12-month period ending in March 2022 and increased 2.5 percent in March 2021. Inflation-adjusted (constant dollar) private wages and salaries declined 3.3 percent for the 12 months ending March 2022. Inflation-adjusted benefit costs in the private sector declined 4.0 percent over that same period.

That's concerning, as wages and salaries being 3.3% behind inflation is going to make it very hard for our robust demand and consumer spending to continue (although it’s sure been good for company profits!).

But I also notice that some jobs have been able to keep up with inflation better than others.

Those increases in pay for the leisure/hospitality and retail sectors are generally at the bottom end of the wage spectrum, which is quite a switch from what we have seen in much of the 21st Century. On the other side, you can also see where manufacturing and construction are going to have to raise their wages to keep up with the higher demands in those industries, particularly the infrastructure bill accelerates many projects in the next year.

I also note that public sector workers have lagged behind on wages and salaries, especially public school teachers. Add in the attacks that right-wingers are laying on teachers at the state and local levels in many parts of the country, and logic tells you that it is going to be difficult to retain teachers unless that wage growth becomes quite a bit higher. Or there will be unmanageable teacher/staff shortages for the 2022-23 school year (which is part of the Koch/Bradley/DeVos plan, now isn’t it?). We’ll have another US jobs report to see if US hiring stays strong, and to see if wage growth continues to be in this middle ground where the increases are higher than what we had a year ago, but not keeping up with inflation. It feels like these patterns have to change for at least one of these areas, but like a lot of things in our economy, it's unclear what part is going to give, and how soon that'll happen.