Here’s the current state of things. There are nearly nine million people actively seeking employment, yet 5.4 million jobs are going unfilled. This is creating the widening skills gap we’ve talked about before. The national unemployment rate is 5.3 percent as of June 2015, down significantly from 10 percent in 2010. The minimum wage has remained stagnant at $7.25 per hour for the last six years, while city and state rates have increased significantly in different geographies.
These converging factors have created significant wage pressure especially among lower end jobs over the last 12 months. In response, some of the country’s largest employers have increased wages in 2015 which has changed the dynamic in local markets significantly. Walmart, for example, increased its entry level pay to $10 per hour (an increase of $1) for more than 500,000 employees. Target also increased its hourly wage by $1 in April, and McDonald’s just increased its entry level pay this month by 10 percent to $10 per hour for 90,000 workers.
TJX, which owns TJ Maxx, Marshalls and Home Goods, increased its minimum pay rate to $9 per hour in June and plans another bump to $10 per hours at the beginning of 2016. Aetna increased its lowest paid contact center employees by 33 percent in April to $16 an hour, and Whole Foods Market employees now earn a minimum of $10 per hour and have experienced a turnover rate of less than 10 percent. Less influential employers in the same market can’t ignore these shifts when it comes to competing for workers.
Other considerations are taken into account when determining wage rates, such as bi-lingual candidates, weekend shift pay, shift differentials and market salary rates. But it’s not just the pay rate that matters. Companies should shore up these competitive advantages to attract top recruits at a fair wage:
- Steadiness of available hours: A consistent schedule of 40-plus hours a week helps hiring and retention.
- Background check screening process: The type of check and candidate on-boarding process have a direct impact on the time to fill.
- Job requirements: The requested skill set of the candidate and the related pay rate should be factored together; misalignment slows the recruiting process.
- Resumes and interviewing: Many qualified entry-level candidates do not have a resume; and the less steps in the interview process, the quicker the position can be filled.
- Supervisor training: There is a direct correlation between employee retention and the strength of an employee’s manager or supervisor, therefore, on-going supervisor training is important to minimize turnover.
Being competitive in the marketplace matters. It may take some time to realize the benefits, but an increase in wage rates has a positive impact on the organization as a whole. Here are some examples of results:
- Increased visibility: After The Gap increased wages it experienced a 15 percent increase of job applications over the previous year.
- Decrease in turnover: Costco saw a decrease in turnover after increasing hourly wages above market rate, and its employee participation in sponsored health insurance rose to 88 percent.
- Greater employee engagement: The Home Depot experienced an increase in retention and employee engagement in career development programs after increasing wages.
- Greater productivity: FedEx experienced higher productivity in its hubs after increasing the bottom tier of hourly workers.
In the first half of this year, Hire Dynamics had 50 clients increase their pay rates with an average increase of 14 percent. Conversations around market factors, business factors and simply the right thing to do helped companies determine their threshold for fair wages that inevitably effect the bottom line in a positive way.