GRand Rapids-area employers are raising wages by an average of 5.2 percent this year, an amount that exceeds historical norms as companies adjust pay to attract and retain people in a fiercely tight labor market.
The wage increase for 2022 is compared to the 4.4 percent average wage increase for regional employers provided in 2021 in all sectors, according to the Businessmen’s Association, a Grand Rapids-based HR nonprofit that annually polls members to gauge wages in the area. The resulting report provides an indicator of market norms and trends, at least among association members, for compensation rates in times of tight labor markets.
By 2021, the Employers Association’s annual wage survey found that average salary increases in the Grand Rapids area had declined, including 2 percent in 2020.
The higher compensation adjustment begins as employers raise wages to attract new workers or lure back those who left the workforce in the early months of the COVID-19 pandemic, said Jason Reep, president of the Employers Association.
A related difference found this year is that the average increase in the level of compensation was across both entry-level positions and existing staff, said Reep. In the last two years, employers have primarily made the biggest salary adjustments for entry-level jobs.
“One can read into that to say, ‘Hey, we need to make sure we pay attention and provide equity to other roles in the organization as well. It works to create equity beyond that entry level,'” said Reep. “The entry-level rate is still increasing. They don’t stop growing, they just grow at a less significant rate than others.
The Employers’ Association’s 2022 salary survey includes data from 292 organizations, mostly in Kent and Ottawa counties, for 18 major job groups, such as production or office, and 348 specialty occupations.
The COVID factor
The wage increase for 2022 comes amid a labor market that was tight before the pandemic and has continued to be tight ever since. Michigan’s civilian workforce remains below pre-pandemic levels with the statewide unemployment rate low.
In September, the state’s workforce was more than 4.9 million people, nearly 80,000 below January 2020, according to the Michigan Department of Technology, Management & Budget.
The state unemployment rate for September was 3.7 percent, compared to 4 percent in August and 5.2 percent in September 2021.
Locally, the Grand Rapids area had a 3.2-percent unemployment rate in September, which compared to 3.9 percent a year earlier. The civilian labor force in the Grand Rapid metropolitan statistical area has passed the pre-pandemic level of last spring and 583,500 in September, or 4,000 people more than January 2020.
Workforce challenges have led many employers to increase wages to attract and retain workers, Reep said.
“What’s happening during COVID is that because a lot of people are leaving the workforce at least temporarily, some permanently, it’s becoming harder to find people to fill some roles, and so we’re seeing rates go up as a result of the impact of COVID,” Reep said. However, he noted that “there are many factors” driving up wages and “it’s not just a COVID thing.”
As the civilian labor force nears or returns to pre-pandemic levels in markets across the country, Reep expects some easing in wage inflation, although a tight labor market is likely to remain.
Based on the wage analysis The Employers’ Association has carried out for members, the size of the salary increase planned for 2023 has eased, but remains greater than in the years before the pandemic, said Reep. He estimated the wage increase for next year could average about 4 percent among Grand Rapids-area employers, as the economy cools in the wake of rising interest rates to address high inflation.
“It’s still difficult. Let’s not gloss over it, but it’s not difficult to find qualified people for specific roles and they may not need a salary adjustment,” Reep said. “The challenge is that employees have come to expect a certain level of pay. They’re like, ‘I don’t know if I’m going to go back there to work less. I’m going to save this.’ I don’t think it will continue to grow at this particular rate (5.2 percent). Like all things in the world, it will grow every year, just how much it grows.
Raising the bar for entry-level jobs
A stark example of the accelerated pace of wage increases comes via data from the Grand Rapids office of Professional Employment Expresswhich conducts its own wage survey in the market.
Before the pandemic, 28 percent of entry-level jobs filled by the firm paid less than $16 an hour, said David Robb, co-owner and managing director of the Grand Rapids office of Express Employment Professionals. As of October of this year, only 5 percent of the firm’s entry-level positions placed in manufacturing and distribution companies paid less than $16 an hour.
“Everything goes up. We keep expecting it to slow down and the employer keeps saying, ‘Oh, we can’t improve any more.’ I feel like we’ve been saying that for a year, but until now, it’s not really slowing down. We are constantly seeing things improve,” Robb said.
From the beginning of 2020 to now, the entry rate for positions filled by Express Employment Professionals for clients has increased from about 25 percent to 35 percent, he said.
Also, many workers now consider $16 an hour to be the “absolute minimum” pay rate they will receive with an entry-level job offer, Robb said.
“It’s classic supply and demand if you look at it from an economic point of view. There’s more demand for labor than supply, so companies keep trying to raise their wages to compete,” Robb said. shifted. They know it’s a job seeker’s market.”
More frequent adjustments
Express Jobs professionals have witnessed employers make semi-annual or quarterly salary adjustments to retain staff and protect them from leaving for bigger jobs elsewhere, Robb said. Employers are also reevaluating the benefits of retaining staff, he said.
Out of the pandemic, the Employers Association has also seen an increase in companies allowing more flexibility to work remotely, providing discretionary bonuses, attendance awards or revenue sharing, Reep said. Employers are also increasingly emphasizing workplace culture as an attraction for employees, he said.
In the periodic HR roundtable conversation the association hosts with members, compensation and benefits “always a topic” as professionals try to identify creative ways to retain employees without just resorting to higher pay, said Reep.
“They’re really trying to say, ‘How can we basically provide more value if we can’t make too many adjustments on compensation?’ he said. “‘What can we do to add value for people to stay in the organization?'”
While the tight labor market remains, employers should continue to examine pay and benefit levels with a focus on internal pay equity among employees and external competitiveness in the market with other employers, Reep said.
By regularly reviewing compensation, employers can avoid getting “out of whack” with the market because they compete for workers, said Reep. The trick is to keep wages competitive without damaging the company’s cost structure by raising wages too quickly.
“People really need to stay informed about this,” he said. “You don’t want to be a reactionary.”