“We are paying the guy cutting up fruit $19 an hour,” complained the CFO of a major agricultural producer I recently spoke with. Almost on a daily basis I speak with an executive who tells me how one of their team members received a tremendous pay increase to jump ship. The problem with such stories is that everyone likes to talk about that one example that catches everyone else’s attention. And if all you hear is such stories for a while, you end up believing that such wage increases are the norm, not the exception.
The “Wages Are Skyrocketing” Narrative Is False
Anecdotal evidence is at odds with the data.
December 22, 2021
Audrey Shtecinjo/Stocksy
Summary.
The authors hear a lot from executives that they are currently having to stomach massive pay increases for lower-level workers. But the data doesn’t support that. U.S. Bureau of Labor Statistics tracks wages and salaries for production and non-supervisory workers. The inflation-adjusted wages of these production workers has increased by a little under 9% since 1970, while the equivalent increase for all employees in the private sector has been 76%. History lessons aside, nominal wages increased by 5.8% in October of this year. However, inflation for the same month was 6.2% and is now trending toward 6.8%, the highest in 39 years. This is why the BLS estimates hourly wages for production and non-supervisory workers fell by nearly 1% in October. In other words, regardless of the current narrative, the sky is not falling. Yes, wages of production workers are up. But prices are up even more. So, if your margins are shrinking, it’s more likely that you have a pricing problem rather than a wage problem.