Published in Economic Development

Wage growth keeps pace in West Michigan

BY Sunday, December 08, 2019 04:41pm

Employers across West Michigan granted pay raises this year averaging 2.5 percent to 3.5 percent, according to annual survey data.

The local wage and salary increases for 2019 were generally the same as the prior year and aligned with national data, said Maggie McPhee, director of information services for The Employers’ Association in Grand Rapids.

Left: Russ Gardner, right: Gabe Ehrlich COURTESY PHOTO

Wage and salary adjustments were higher than the average for some professions in a tight labor market, McPhee said.

Pay raises for truck drivers, for instance, averaged 4 percent this year, while increases for maintenance and machining jobs in the manufacturing sector averaged 4 percent and 5 percent. Pay hikes for certain administrative assistant positions averaged 4.4 percent with a salary of $41,980.

At the other end of the spectrum, pay for a tool and die maker increased an average of just 1.1 percent in 2019 to $29.91 per hour. 

Average wage and salary increases reflect the aggregate results from The Employers’ Association survey of 272 companies across the region.

Raises for 354 jobs within 16 major classifications also reflect an ongoing change in the demographics of the workforce, McPhee said. As older workers in the Baby Boomer generation retire, younger employers typically are filling those positions at a lower wage, McPhee said, adding that trend somewhat skews the overall averages.

“There’s a lot of that activity going on,” McPhee said. “They lost the higher wage earners and people are moving into those jobs at a lower pay.”

As that shift occurs, national surveys show that fewer employers across the U.S. intend to boost starting salaries in 2020.

Nearly four out of 10 employers answering Michigan State University’s annual survey on employer recruitment of college graduates said they plan to increase starting salaries for college graduates in 2020, a notable decline from about 50 percent in prior years. About six in 10 employers said they intend to maintain the same pay levels for the new employees they hire.

Employers planned to raise starting salaries an average of 4.3 percent in 2020, according MSU’s Collegiate Employment Research Institute. The planned increases in starting salaries for graduates ranged from 1 percent to as high as 20 percent.

Russ Gardner, director of the MSU Collegiate Employment Research Institute, called the smaller number of employers raising starting salaries as “cautionary,” given outlooks for slower economic growth next year.

Survey responses show “enthusiasm” among employers for paying higher starting salaries to attract talent “has tapered off and they’re more cautious about it,” Gardner said.

“There didn’t seem to be a lot of competition over salary and benefit packages. They didn’t seem to be overly concerned about it,” Gardner said. “We’re not seeing a big rush to continue to increase salaries.”

That’s a change from the last few years, he added.

New tools

Rather than raise starting wages, some employers operating in a tight labor market are seeking to attract young talent with one-time signing bonuses, according to results from MSU’s survey.

“Not all compensation will be in the form of base salary. In highly competitive labor markets, employers are tempted to use signing bonuses as extra incentive to candidates to accept the offered position,” according to the Collegiate Employment Research Institute’s report.

Four in 10 of the survey’s more than 2,800 respondents told the Institute that they have “some type of additional incentive for signing an employment contract.” That’s double the rate of last year, and four times the number of employers offering signing bonuses in the several prior years.

“The economy has remained strong and opportunities have increased, and employers are faced with employees finding their opportunities down the street or at a different company,” Gardner said. “Employers are dealing with turnover and then we’re continuing to grow (the economy) at a pace where they still need to hire.”

Pace of growth cools

Recent economic outlooks expect personal income — a combination of wages, salary and income from sources such as investments — to grow moderately in Michigan in 2020.

Comerica Inc.’s latest outlook for the state projects moderate 4.5-percent personal income growth next year, up from the expected 3.9 percent this year.

The University of Michigan’s new outlook for the state sees personal income growing 3.6 percent in 2020. That compares to an expected growth rate of 4.1 percent this year.

Wage growth across the U.S. in recent months has “really kind of died down” after a period of acceleration during the decade-plus economic expansion, said economist Gabe Ehrlich, associate director of U-M’s Research Seminar in Quantitative Economics.

“That has been actually a puzzle in this economic recovery. You would expect wage growth to really be picking up with unemployment down as low as it is. Instead it’s really kind of leveled off this year,” Ehrlich said. “This far into the recovery, I would have expected wages to rise a little faster now.”

Wages across the U.S. are rising 3 percent to 4 percent annually, depending on the measure used, he said. Ehrlich expected national wage growth rates of more than 4 percent “based on where we are right now.”

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