Sluggish Recovery Finally Changing Bay State Job Market
The 2012 Associated Industries of Massachusetts General Wage Report released today indicates that the lurching economic recovery has finally begun to transform the job market for both employers and employees in Massachusetts.
Employers are planning the largest wage increases in three years, changing their emphasis from compensation freezes and other defensive tactics to long-term compensation objectives for star performers.
Employees, meanwhile, are moving to new jobs in numbers that have almost doubled the voluntary turnover rate at Massachusetts companies to 7.8 percent. The U.S. Labor Department reports that the number of Americans leaving their jobs hit 2 million in February, the highest number of resignations since November 2008.
The changes in the job market reflect an underlying level of comfort among employers and workers even as the economy continues to struggle with issues such as the European debt crisis, slowing job growth and stock market declines. The Associated Industries of Massachusetts Business Confidence Index (BCI) edged off three-tenths of a point in May to 56.8, but remains 5.1 points above its reading in May 2011.
“What is evident is a lack of sustained upward momentum in the economy, even though business conditions and business confidence have improved over time,” said Raymond G. Torto, Global Chief Economist at CB Richard Ellis Group, Inc., the chair of AIM’s Board of Economic Advisors (BEA).
Employers in Massachusetts, where the 6.3 percent unemployment rate stands nearly two points below the national average, plan to boost wages at about the same rate as companies around the country. The General Wage Report finds that those employers planning to provide salary increases have a 2012 merit increase budget of 3.0 percent (2.55 percent when factoring companies not providing increases), showing a continued upward trend since 2009 when reported merit increase budgets were 1.7 percent.
National survey data for planned merit increase budgets fluctuates between 2.8 percent and 3.0 percent. The Economic Research Institute reports budgeted merit increases at 2.8 percent, Mercer Consulting reports 2.9 percent and the Hay Group reports 3.0 percent. Three years ago these national numbers barely reached the 2 percent mark.
Only 11 percent of respondents to the AIM survey implemented a pay freeze last year, compared to 66 percent in 2009. None of the 2012 survey respondents reported plans for a hiring freeze this year, compared to fourteen percent of survey respondents in 2009.
Growing confidence is changing behavior on the employee side as well. In 2009, survey respondents reported that 4.5 percent of employees voluntarily left their positions. This year, respondents report a 2011 voluntary turnover rate of 7.8 percent.
As employees increasingly look to outside opportunities, it will be necessary for employers to focus on retention strategies. Survey results indicate an awareness of this need. The percent of companies concerned with communicating the value of total compensation, for example, has nearly doubled over the past three years from 26 percent in 2010 to 50 percent in 2012.
Survey responses indicate that employers will focus retention efforts in 2012 on top performers. Forty-six percent of employers are concerned about focusing compensation on high-potentials.
The job-market shift is prompting long-term changes as well. Companies are reviewing their current compensation packages and gradually increasing the money spent on performance incentives. Companies are advised to monitor their turnover and consider any budgetary impact these factors may drive. You may not want to lead the market direction, but failing to keep up with the market will impact both your ability to attract and retain staff.