70% of U.S. businesses hiked wages in Q1, but the Great Resignation shows no signs of stopping

Some 70% of businesses hiked wages in the first quarter of 2022, according to the National Association for Business Economics, based on a survey the organization conducted April 4 to 12 this year. 

This is up from 60% in the January survey and represents the highest level since the survey’s inception 40 years ago, and 60% of respondents reported they are successfully passing on some or all of the cost increases to customers, Nevertheless, the survey also indicates that many companies are still struggling with employee turnover.

About 50% of firms reported they were experiencing a labor shortage, although the share of businesses reporting both skilled and unskilled labor shortages declined compared to the January survey. About a third of panelists said their firms were not experiencing a labor crunch.

This was the fourth consecutive survey in which respondents reported there had been no wage declines at their businesses. Also, 31% of panelists cited an increase in employment at their firms, similar to results of the last three surveys.

Data from the employees’ perspective

Despite the fact that most U.S. firms are increasing wages, 21% of American workers took a new job in the past 12 months, according to the State of Work in America survey conducted by consulting firm Grant Thornton.

One of the survey’s most illuminating findings is that 2 of every 5 workers who switched jobs over the last year are now actively looking for another job. These recent job-switchers will account for a large share of labor-market churn in the near term as the so-called Great Resignation continues.

Among those who recently took a new job, close to 60% said they’d had two or more competing offers when they made their decisions, the survey found. The two biggest reasons that they turned down an offer were pay and benefits, at 42% and 33%, respectively. 

Businesses’ demand for labor continues to surpass the supply of workers, which has in turn created favorable conditions for job-seekers. Workers are benefiting from new labor market opportunities in which job openings are near a record high and pay is going up.

“The power is going to the employee right now,” said Grant Thornton principal Tim Glowa. “The war for talent is continuing, and it’s really not showing any signs of slowing down.”

Among workers who switched jobs in the last year, the top three reasons cited for the move were pay at 37%, lack of advancement opportunities at 27% and benefits other than health and retirement at 19%. Other reasons included a poor manager or misaligned job expectation. These findings strongly suggest employers need to reconsider compensation, benefits and other offerings to prevail in the search for talented workers.

On another note, the survey demonstrates that most companies are not able to discern the real sources of employee stress, such as debt, medical issues, mental health struggles or an array of other personal issues, said Glowa. This lack of awareness means it can be tough for businesses to offer enticing benefits that resonate with employees.