Worker, Wage, Skill Trends are Top of Mind as Economy Changes

Miniature worker figures sitting on U.S. dollars

As credit union leaders prepare to transition from the third to fourth quarter of 2019, the economy’s direction remains top-of-mind — as well as labor market topics and issues. The following is a round-up of worker trends and topics gaining attention in California, Nevada and nationwide.

(View Dr. Robert Eyler’s recent Aug. 5th webinar on “Key Economic Issues Setting the Stage for Second-Half of 2019"—ACCESS ARCHIVED WEBINAR)

What do Salaries ‘Feel Like’ in LA, SF and SD?
Emsi's latest "Accounting for the Cost of Living" report shows that the San Francisco, Los Angeles, and San Diego regions top a list of 15 U.S. metropolitan areas with respect to the difference between what an average middle-class professional worker pulls in annual salary versus what it "feels like” he or she makes due to local expenses. The housing, food, energy, transportation and healthcare categories are taken from the Council for Community and Economic Research's "Cost of Living Index" project. The report analyzes this trend for software engineers, registered nurses, business analysts, executive assistants, account managers, customer service representatives, marketing managers, recruiters, data scientists, and product designers.

Bay Area Payroll Wage Growth on a Roll
PayScale’s U.S. Second Quarter 2019 Index shows the greater San Francisco area recently displayed the fastest “nominal” worker wage growth (before inflation) — 1.3 percent quarter-over-quarter, and 4.5 percent year-over-year. You can also compare local quarterly and annual wage growth trends within the following California regions by using PayScale’s “Trends in Compensation” tool: greater Los Angeles, San Diego, San Francisco, and San Jose/Bay Area (geography, industry, company size, and job category from 2007 – 2019).

San Diego has Edge in Small Business Hourly Earnings
The Paychex/IHS Markit Small Business Employment Watch reports that the San Diego region’s small businesses led all U.S. metropolitan areas in annual growth within average hourly earnings as of July 2019. From a snapshot view, San Diego stood at $28.85 per hour (No. 1 in annual growth); Los Angeles at $29.72 per hour (No. 3 in annual growth); San Francisco at $34.43 per hour (No. 8 in annual growth); and Riverside at $24.26 per hour (No. 12 in annual growth). You can also view U.S. small business wage and job trends by timeline, regional/state performance, metropolian performance, and industry.

‘Job Switchers’ Driving Top End of Wage Growth Trends
ADP Research Institute’s latest Workforce Vitality Report (which separately tracks western states) shows particularly that “job switchers” in the information industry continue to lead the way in hourly wages ($41.08 per hour) and wage growth (nearly 10 percent year-over-year). Job switchers in professional/business services and construction also realized high wage growth of 8 and 9 percent, respectively. On average, wages for all U.S. workers rose 4 percent today compared to this time last year (increasing to $28.54 per hour) due to a tight labor market. The regional numbers behind the report can be accessed here.

Will Recession Fears Keep Two-Tier Wage Systems in Place?
That’s what PayScale is asking in its latest report — “Are Two-Tiered Wages Contributing to Wage Stagnation?” It’s a payroll system “where one group of workers receive lower wages than another group,” the report states. “It became more common in the late 1980s and was attractive to organizations with high rates of turnover for new hires, or with many high-wage/high-skilled employees about to retire.” Time will tell whether this wage system at some companies continues to be popular or not.

Construction Pay Raises in California are Middle of the Pack
An Orange County Register business columnist’s latest blog (“California Construction: 10th Highest Wage, but 28th in Largest Raises”) sheds some light on data extracted from the U.S. Labor Department Bureau of Labor Statistics' recent update on county wages. “For an industry that frequently complains about a worker shorter, construction compensation in California isn’t a national leader: pay is 10th highest while pay raises rank 28th,” it states. On an interesting note: “California has added more workers within individual construction trades since 2013 than the entire construction industry employed in 44 states in 2018.”

2020 Wage Increases? Yes, but about the Same as This Year
Willis Towers Watson's "2019 General Industry Salary Budget Survey" states that U.S. employees hoping for larger pay raises next year may be disappointed. “U.S. employers plan to hold the line on budgeted pay raises in 2020, despite low unemployment and a tight labor market,” it says. “Some employers, however, are projecting modestly larger discretionary bonuses next year, while others are adding separate promotional budgets in their efforts to supplement employee salaries — with the goal of rewarding top talent.” Salary increases are expected to “hold steady” in 2020 for exempt, non-management employees (3.1 percent), management employees (3.1 percent), non-exempt hourly employees (3 percent) and nonexempt salaried employees (2.9 percent). “Companies are budgeting slightly smaller increases for executives (3.1 percent in 2020 versus 3.2 percent in 2019),” it added. “Virtually all companies (96 percent) plan to give raises next year, the same percentage as this year; however, more companies are formalizing their promotional increase budget (30 percent), which is up significantly since last year. Pay raises have hovered around 3 percent for the past decade. The last year employers provided larger increases was 2008 (3.8 percent).

‘Qualified’ Workers: Most Important Small Business Issue
The National Federation of Independent Business’s “Small Business Optimism Index” shows the only thing stopping small business owners across the nation from growing their operations is finding “qualified” workers. “Small business owners remain very optimistic about the economy but are being hamstrung by not finding the workers they need,” it states. A side report (the latest monthly "NFIB Jobs Report") says a “record 26 percent of small business owners” cited difficulty in finding qualified workers as their single-most important business problem.


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