Companies Plan To Raise Wages by the Most in 14 Years

Companies plan to show workers the money next year, budgeting for the biggest increases in salaries since 2008 as they seek to attract and retain employees and keep pace with inflation in a tight labor market, a new survey showed.

Projections for 2022 “salary increase” budgets—that’s the pool of money companies set aside for salary increases in the following year—jumped by almost a full percentage point to 3.9% in November from 3.0% in April, The Conference Board said in a report Tuesday. Of 240 organizations surveyed between Nov. 8 and 19—more than half of which have more than 10,000 employees—46% said higher wages for new hires played a role in boosting their budget estimates, while 39% said inflation did. In October, 12-month consumer prices jumped 6.2%, the fastest pace in 30 years.

The survey also showed companies plan to raise their so-called pay structure by 2.5%, meaning they’re aiming to increase their pay ranges across the board to account for changes in the cost of living and salary markets within their industries. As a result, wages could rise across all levels next year.

While workers will welcome the pay increases, higher salaries may not bode well for reining in inflation. As companies are forced to offer higher salaries to attract and retain employees in a competitive market for workers, what economists call a wage-price spiral could develop. That’s a phenomenon where elevated prices and rising wages feed each other, leading to faster increases in both.

In fact, a wage-price spiral “may already be in the works,” Gad Levanon, vice president of labor markets at The Conference Board, wrote in the report. “It is likely that severe labor shortages will continue through 2022. During that time, overall wage growth is likely to remain well above four percent. Wages for new hires, and workers in blue-collar and manual services jobs will grow faster than average. At the same time, there are no signs of inflation slowing down, and it may remain elevated in the coming months, increasing the need for cost-of-living adjustment.”

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