Real earnings (wages minus inflation) vary greatly from one household to the next. Consumers’ experiences will vary depending on their occupations and the products they purchase.
For example, workers in the lowest-paying sector of the US economy, leisure and hospitality, received an almost 16 percent boost in 2021, to $16.97 an hour. That means that the average employee at a bar, restaurant, or hotel saw their salary rise more than two times faster than inflation, resulting in a net yearly pay increase of 9%.
Similarly, in December, rank-and-file workers in transportation and warehousing saw their annual salary jump 8.4% to $25.04 an hour. Retail employees received a 7% raise to $19.20 per hour. These either outperformed or kept pace with inflation.
Is inflation outpacing pay growth?
Despite rising salaries, inflation resulted in a 2.4 percent pay loss for the ordinary worker last year. According to the US Department of Labor, inflation increased by 7% in December from the previous year. Wages climbed by 4.7 percent on average per hour. On average, this translates to a wage decrease of more than 2%.
Is it necessary to raise wages?
Raising the federal minimum wage will boost consumer spending, boost company profits, and help the economy expand. A little increase would boost worker productivity while also lowering turnover and absenteeism. It would also help the economy as a whole by increasing consumer demand.
Do UK wages rise in line with inflation?
Wage growth in the United Kingdom increased in January as job openings reached a new high, but pay could not keep pace with the highest inflation rate in three decades.
Is there a pay raise for everyone?
Raising the minimum wage means that employers and employees in the United States are legally obligated to increase the hourly compensation of their minimum-wage employees—and only their minimum-wage employees. If you currently earn more than the minimum wage, your employer is not compelled to give you a raise.
While it won’t be required, it’s expected that many organizations will raise pay rates for their other employees as well. Here are some of the reasons for this:
- They’ll want to be able to distinguish between different skill levels: Let’s imagine you’re currently employed in a semi-skilled employment that pays $15 per hour. You hold a technical degree and have worked in the field for several years. If the minimum wage is increased to $15 per hour, you will be paid the same as a high school student who works part-time for the same employer. Most businesses understand that this isn’t fair to you, and that various jobs deserve varied pay scales.
- They’ll want to keep employee morale high: Employers are also aware that compensation disparities can have a negative impact on employee morale. Employee satisfaction is heavily influenced by pay and benefits, and organizations realize that if remuneration becomes a source of dissatisfaction for employees, motivation, dedication, and passion will decrease.
- They will seek to increase employee retention because happier employees stay longer. According to study, a 10% rise in base wage corresponds to a 1.5 percent increase in the likelihood of a worker staying with their current job.
Despite the fact that raising the federal minimum wage would result in a trickle-down effect of greater labor costs across their entire organization, a majority of employers surveyed by the National Employment Law Project were in favor of doing so. In fact, a minimum wage increase was backed by 61 percent of small company owners.
Why is raising the minimum wage a bad idea?
Since 2009, the federal minimum wage of $7.25 per hour has remained unchanged. Increasing it would increase most low-wage employees’ earnings and family income, pulling some families out of povertybut it would also cause other low-wage workers to lose their jobs, and their family income would fall.
The Budgetary Consequences of the Raise the Wage Act of 2021 (S. 53), which CBO evaluated in The Budgetary Effects of the Raise the Wage Act of 2021, allows users to study the effects of policies that would raise the federal minimum wage. Users can also build their own policy options to see how different ways to increasing the minimum wage would influence earnings, employment, family income, and poverty.
Why is it beneficial to raise the minimum wage?
“Raising the minimum wage is a “simple, direct method to boost low-wage employees’ salaries, lift many poor families out of poverty, and lift many children out of poverty,” according to Ken Jacobs, chair of the UC Berkeley Labor Center. “It enables us to do so in a way that is beneficial to the economy as a whole and it is extremely popular among voters.”
While President Joe Biden’s historic $1.9 trillion pandemic relief plan does not include a Democrat-backed drive for a $15 minimum wage, it is certain to be a recurring issue. According to some academics, the economic devastation produced by the COVID-19 pandemic emphasizes the importance of finding a new means to boost the minimum wage, which is now fixed at $7.25 per hour for millions of Americans and $2.13 per hour for those who rely on tips.
Why should the minimum wage be increased?
Legislators submitted the “Raise the Wage Act of 2021” in January 2021, with the goal of raising the federal minimum wage from $7.25 per hour to $15 per hour by 2025. It would be the first hike in more than a decade, and the longest since 1938, if passed.
Many state and local governments have already established a $15 minimum wage, while the federal minimum wage has stayed unchanged. (In 2014, for example, Seattle mandated that employers gradually raise their minimum wage until it hits $15 per hour.) Seattle’s minimum wage will be $16.69 per hour in 2021.) Nonetheless, such a huge change at the federal level will undoubtedly be controversial and hotly disputed.
Advantages
Raising the federal minimum wage to $15 per hour would help low-income people improve their overall level of life. These workers would be able to cover their monthly expenses more readily, such as rent, car payments, and other household costs. “Today, a full-time worker cannot afford a basic, two-bedroom apartment in any county in the United States,” said Representative Robert Scott, leader of the House Committee on Education and Labor. Senator Bernie Sanders has also stated that the minimum wage should be $15, as he feels that full-time workers should not be forced to live in poverty.
A second, less visible benefit of hiking the minimum wage has been proposed: improved staff morale. Not only will happier employees make for a more cohesive and effective workforce, but they may also increase customer satisfaction. Furthermore, if employees are happy with their jobs and compensation, they are less likely to leave, which saves the company money on hiring and training.
Proponents say that raising the minimum wage to $15 will assist women and minorities. A $15 minimum wage would improve the pay of 31% of African Americans and 26% of Latinos. Furthermore, a disproportionate number of minority workers live in one of the 21 states with a $7.25-per-hour minimum wage.
Disadvantages
Small firms, according to opponents of raising the minimum wage, would suffer as a result of such a significant increase. An rise in the federal minimum wage will dramatically increase small businesses’ operating costs and tighten profits, just as they are beginning to recover from the international Covid-19 outbreak.
Raising the minimum wage to $15 would also boost daycare expenditures by 21% on average in the United States. In 2019, the average hourly wage for an early childcare worker in the United States was $11.65. As a result, a nationally enforced $15 minimum wage would nearly triple the cost of labor for childcare providers.
Advocates on both sides will continue to cite several reasons in favor of their viewpoints as the federal minimum wage debate continues to elicit passionate opinions. Those who oppose a minimum wage claim that market forces should be in charge. If there is a lot of competition for talented personnel, a business may have little choice but to raise salaries to keep staff. Employers and employees should be aware of both sides of the issue and prepare for a change in the federal minimum wage law that is almost certain to occur.
(This article was greatly aided by Logan Adams, a spring clerk in our Dallas office.)
What is a reasonable pay rise in the United Kingdom?
Employee appreciation is an important aspect of developing a productive and happy workforce. Increased pay is one of the most obvious ways to recognize and promote an employee’s accomplishments, but it can be difficult to decide when to do so and how much a suitable pay raise should be.
Each case will be determined by the individual employee’s performance in their role.
Depending on the employee’s level of advancement, you may choose to grant a higher or smaller salary raise. As a starting point, the Office for National Statistics reported a 3.3% average pay increase for most full-time employees in the UK in 2018.
The major factors for an employer would be when the best time to grant a pay raise would be, how much this raise should be, whether several employees deserve the same amount of pay rise, and how best to reward individual employees.
Handling salary increase requests is also a delicate matter, since you may need to refuse a pay raise request at times. Although these situations might be distressing for employees, they can be turned into great experiences if you create goals for them to achieve their desired increase in the coming months.