Inflation is hitting people hard, but some workers are seeing higher wages
RACHEL MARTIN, HOST:
Forgive me because I'm going to tell you something you already know because you live it, most likely. The prices for everything from food to rent to gasoline have all gone up. Inflation is now running at the highest level that we have seen in decades. Even though that's obviously hitting a lot of us hard, there could be a bright side here in the form of higher wages. The Conference Board, a nonprofit that conducts economic and business research, says businesses are expected to increase pay an average of 3.9% in the next year. Dana Peterson is the chief economist at the Conference Board, and she joins us now. Dana, thanks for being here.
DANA PETERSON: Thanks for having me.
MARTIN: You were predicting some of the biggest wage increases in more than a decade. Who is going to see that money?
PETERSON: Well, it looks like people who are new workers will see that money. Certainly, there's something called the great resignation going on, where many workers are saying, look; I want higher wages. I want better benefits. I'm seeing new people come in, and they're getting higher wages. And I think that they should be. So I'm going to get out there, find a new job, maybe switch industries and benefit on those higher wages.
MARTIN: So explain the connection between the inflation that we all see and these predicted wage hikes.
PETERSON: Sure. Well, every year, we run a survey. And, actually, this year we ran it twice. And we asked companies, well, how much of your budgets are you going to be spending on compensation? So that's wages and benefits and other things. And we saw a pretty dramatic increase here. Earlier this year, most companies were saying, for 2021, we're going to spend about 2.6% of our budgets. But that increased to 3%. And looking ahead to next year - originally, they were saying 3% of their budgets were going to comprise paying for benefits, and that jumped to 3.9%. And so certainly anyone who is in a company that's looking to raise wages by that much will certainly benefit, both new workers and existing workers.
MARTIN: But are companies, businesses doing this just out of the goodness of their own heart because their employees are having to pay so much for just consumer products? Or is this about competition because the demand for workers is so high?
PETERSON: I think it's about both. So certainly, there's a lot of competition. Right now we're having labor shortages, especially in those industries where people have to physically come in and work - services industries, such as restaurants, hotels, airlines, even brick-and-mortar retail. Many of those businesses - people are still a little bit wary of coming back to work. And so they're saying, well, if you want me to come and work in these industries, then you're going to have to pay me more. And so businesses are trying to raise wages and benefits to attract workers and also to keep the workers they have. So that's one element. The other element is because inflation is rising so high. As you said, costs for everything have been rising, and so the consumers are saying - and who are also workers - are saying, well, I need more money to help compensate me for these higher prices that we're seeing.
MARTIN: Are the hikes in wages that you're predicting - are they going to be enough to counteract the impact of inflation?
PETERSON: Well, it really depends on the income of the person. And certainly, we know that people who are on fixed incomes, especially our senior citizens and also people at the lower end of the income spectrum, are going to be harmed the most by these rising prices. And so certainly those folks will suffer the most from higher prices. And, you know, people who are on the lower spectrum of the wage - of the income spectrum would benefit the most from higher wages.
MARTIN: So what about smaller businesses, though? - because if there's a trend towards wage increases, bigger corporations with deeper pockets are obviously going to be at an advantage.
PETERSON: You're absolutely right. This is a tax on smaller businesses, if you think about it. They're the ones who are definitely - especially the ones in in-person services - are struggling to find workers, struggling to keep workers. Everywhere you go, you see help-wanted signs. And certainly, if wages have to increase, it's going to put a squeeze on their profit margins. So that means that larger companies that have the bandwidth to increase wages are going to do so.
MARTIN: If they can't do wages, I assume they're looking at increasing benefits. I mean, there are 11 million open jobs in the U.S. right now, and companies must be scrambling to fill those.
PETERSON: Yes. We're seeing companies do all sorts of things to attract and keep workers, both in terms of wages, as well as benefits.
MARTIN: Dana Peterson - she is the chief economist at the Conference Board. We appreciate your time and context this morning. Thank you.
PETERSON: Thank you.
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