Stephen Miller, CEBS has written a three-part series article for SHRM titled “Inflation’s Return Will Affect Compensation.” The first part was published earlier this week on Compensation and the other two parts will focus on health care and retirement savings. Through his research and discussion with other thought leaders, he mentions several factors that are going to drive up inflation and compensation. These include:
Increased federal unemployment payments have reduced the labor supply;
Disruptions within supply chains have placed inflationary pressures on prices and wages;
Federal Reserve Bank of St. Louis indicated that the economy is seeing more inflation than they expected which they believe could lead to an interest rate increase late next year.
Though it is still early for all the big compensation consulting companies to provide their 2022 wage and salary growth figures, Stephen mentions Trading Economics, which is an online platform providing historical data and economic forecasts, is forecasting a 3.6% increase for 2022 and a 4.0% in 2023. He also mentioned that Kiplinger is forecasting that the Social Security cost of living adjustment (COLA) for retirees will be around 4.5% next year.
Stephen completes the article by mentioning what some other compensation experts believe employers will need to focus on as inflation returns after being a non-factor for several years. These include:
Increase hourly rates by $1 to $2 every three to six months as a retention tool;
Retention and sign-on bonuses for professional and management-level positions;
Revisit total rewards strategies for the post baby boomer generations.