Economists are puzzled that wages have barely increased as unemployment has plummeted. Average hourly earnings have only increased by 2.6% over the last twelve months, only slightly above the level of inflation according to the Bureau of Labor Statistics (“BLS”).
Last Friday, the BLS released the April Jobs Report. The big news from the Jobs Report was the unemployment rate fell to 3.9%, a level not seen since 2000. And, the Federal Reserve projected the unemployment rate will fall to 3.6% in the next twelve months.
With our recent release of the 2018 Retention Report (click HERE to download), I would like to offer a theory that may shed some light on this puzzle. Money is not the primary driver of attraction and retention in the employment marketplace.
Let me clarify. Employers cannot pay substantially below market levels. Employees want to be paid fairly, and they want to be paid competitively. However, employees want more than money, or they will leave.
Employees continue to leave at record rates.
The projected Quits Rate for March was 2.3% or 3.3 million workers. This means that 2.3% of employed workers quit their jobs voluntarily to work somewhere else in one month. According to the BLS, the increase in the Quits Rate also can serve as a measure of workers’ willingness or ability to leave jobs, and it has been on the rise for 8 years.
Employees want more than increased pay.
Most employees do not quit for higher wages. The 2018 Retention Report reveals that less than 9% of employees leave their jobs for increased compensation.
Employees have told us that it is not money alone. Employees expect career development, work-life balance, and high-quality managers. These three categories of reasons for leaving account for almost half (45%) of the reasons employees quit in 2017.
Employers must step up or fall short.
We often hear from employers that struggle because they cannot attract or keep workers. These same employers are worried that they lose employees because of pay. However, the 2018 Retention Report and the lack of wage growth in the labor market show that employees want more than just competitive wages.
For years, leaders have touted the importance of creating preferred workplaces. These same leaders say that employees will choose a preferred workplace over another workplace that offers higher wages. We agree.
It’s clear. Employers must step-up and create preferred workplaces, or they will fall short of attracting and retaining the workers they need to grow their businesses.
Danny Nelms, MBA
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