Raising the Ante: CEOs in Some Sectors Are Increasing Pay to Keep Workers

The picture is almost like the mid-2000s again, when the economy seemed to be prospering before the financial reckoning of 2008. A slowly but steadily expanding economy finally has taken much of the slack out of the suboptimal utilization of American workers that took place during the Great Recession. Now, employers are having to step up with more ways to lure and hold on to workers.

However, while manufacturers often cite a shortage of skilled labor as one of their biggest concerns, they don’t seem to be keeping pace with the rest of the economy in opening the purse strings for talent.

“While manufacturers often cite a shortage of skilled labor as one of their biggest concerns, they don’t seem to be keeping pace with the rest of the economy in opening the purse strings for talent.”

In fact, inflation-adjusted manufacturing wages are down by 1.12 percent since the recovery officially began in mid-2009, according to federal statistics. Real wages for the entire private sector are up 2.03 percent during this period. Some of the reasons for manufacturing’s lag include, perhaps paradoxically, that companies can’t find enough workers worth higher wages.

Among the latest are Abercrombie & Fitch, the hip apparel retailer, which said it would stop using “on-call scheduling”—which requires workers to make themselves available for shifts that may be canceled at the last minute—at its New York stores by the end of the year. State regulators were pressing A&F to make the change, but there’s no doubt that Abercrombie would have liked to hang on to this particular aspect of workforce flexibility that it has enjoyed for many years. The fact that it’s got to be more competitive, even for entry-level and part-time staffers, likely nudged the company toward the change.

Also recently, Netflix upped the ante for tech and media companies by allowing new moms and dads to take as much time off as they would like in the baby’s first year of life. That’s unheard-of, by the standards of American companies, pundits said, exceeding even the offerings by other companies in California with which Netflix competes, such as Google and Apple.

Employers “are awakening to the fact that they’re going to lose their people,” Paul McDonald, an executive at recruiting firm Robert Half, told USA Today. “We’re seeing an increased investment in the employee.”

Among other examples, of course, are Walmart, Target and McDonald’s, each of which have trumpeted increased pay for their lowest-paid employees in recent months, and some smaller and franchise operations have followed suit. Wages, salaries and benefits jumped 2.6 percent in the first quarter, the most since 2008, according to the U.S. Labor Cost Employment Index.

Papouli’s, a four-unit restaurant chain in San Antonio, recently boosted its starting pay to $9 an hour from $8, the newspaper said, as the company fights higher demand for workers from local competitors.

Another restaurant chain, Smokey Bones Bar & Fire Grill, with 65 restaurants in the eastern U.S., last fall began conducting “stay interviews” with managers to determine how to improve their work lives.

And given that the talent squeeze is spreading up and down the pay scale, more Silicon Valley companies – in addition to matching perks such as Netflix’s new leave policy – also are bumping up stock-option awards. “It gives employees an incentive to stay,” Parry Bedi, CEO of marketing firm Glipmzit told the newspaper.

As long as economic growth begins to extend new career opportunities to millennials that haven’t been available before, expect CEOs to innovate to keep them happy about their compensation. The experimentation probably has only begun.

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Dale Buss
Dale Buss is a long-time contributor to Chief Executive, Forbes, The Wall Street Journal and other top-flight business publications. He lives in Michigan.

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