The pace of wage growth at U.S. small businesses continues to pick up, with average hourly earnings growth of 5.18% in August compared to 5.03% in July 2022, according to the latest Paychex & IHS Markit Small Business Employment Watch report. At $30.71 per hour, average hourly earnings for small businesses have increased by $1.51 over the past 12 months.
“Wage growth is usually a convincing sign that inflation is picking up. However, rising wages could provide some respite for families facing rising expenses,” said Martin Mucci, chief executive of Paychex, a payroll and HR software company based in Rochester, New York.
The report is based on payroll data from approximately 350,000 Paychex customers with fewer than 50 employees and was a joint project with international research firm IHS Markit, part of S&P Global.
Differences by region and industry
Regionally, the August report showed the South led the way in hourly earnings growth for small businesses over the past 12 months, with an average increase of 5.53 percent. The Northeast was the only region with hourly earnings growth below 5 percent (4.58 percent).
Industry wages
Other services (excluding government) led the annual growth in hourly earnings among industries at 7.48 percent in August. Annualized growth rates at one and three months were higher at 8.07% and 7.84%, respectively.
In contrast, hourly earnings growth in leisure and hospitality slowed for the seventh consecutive month to 6.37 percent, although the decline from July to August was not as sharp as in previous months.
Small businesses are following suit
Despite recession concerns amid resilient inflation, the labor market remains tight, prompting small US businesses to avoid wage cuts and layoffs.
The latest Major Index of Financial Wellness survey of 500 U.S. business leaders, conducted July 7-20, found that large companies with 500 to 10,000 employees were more likely to say they are growing (61 percent of respondents), compared to 46 percent of respondents. small companies with less than 500 employees. However, almost half (49%) of small businesses consider themselves stable compared to 36% of large businesses.
“Small businesses learned a lot from the 2008 recession, and many learned that they can make adjustments that minimize the impact on wages or staffing during future periods of economic stress,” said Amy Friedrich, president of solutions for US Insurance at Principal in Des Moines. , Iowa-based provider of financial benefits.
“Small businesses are dedicated to their employees,” Friedrich said. “We saw that during the pandemic, and I think we’ll see the same creativity and resilience if the pressures increase in the short term.”
Satisfaction with annual earnings
In other recent economics and compensation research, the median “reservation salary” (the lowest salary respondents would be willing to accept for a new job) continued its annual upward trend, reaching $72,873 in July 2022, up from $68,954 the previous year. according to the latest SCE Labor Market Survey from the Federal Reserve Bank of New York, released on August 22.
The median full-time annual offer salary received over the past four months increased to $60,764, up from $58,469 in July 2021.
Every four months, approximately 1,000 Survey of Consumer Expectations (SCE) panelists are asked for details about their current or most recent employment as part of ongoing research.
Satisfaction with pay compensation at respondents’ current jobs deteriorated, with 56.9 percent of respondents saying they were satisfied with their current wages, down from 58.2 percent in previous year
Meanwhile, satisfaction with non-salary benefits at respondents’ current jobs improved to 63.2 percent, up slightly from 62.6 a year earlier.
