Employers are still struggling to find workers to fill positions despite the U.S. economy adding only 559,000 new jobs in May and hitting a new pandemic low of 5.8% unemployment.
The labor force participation rate is down 1.7% from before the pandemic and has been stagnant since June 2020 with just 61.6%. While more people are returning to the payroll, the economy is still down 7.6 million jobs.
The answer a lot of economists are saying will add more jobs is simply to pay workers more money. I just saw a sign along a busy street announcing FedEx is paying $24 an hour for sorters and loaders in their local office.
About a mile away was a street sign for a local convenience store offering $23 an hour full-time with benefits and a $500 sign-on bonus.
But what happens to those workers that have been with the company for years and have finally worked their way up to $22 from their starting wages of $16 an hour? Will they get the $6 they earned through loyalty and will they even get the new-hire rate of $24?
Raising wages might seem a simple solution but if a company has 100 workers earning less than the new hire gets, how much will it cost the company in additional monies over just paying the new hires?
To make it simple. let's use 100 workers that get a $4 an hour wage to meet the new-hire wage. Just that little amount of money and company taxes and benefits will add $1,000,000 to the company's payroll. And guess who pays the bill for those added wages?
Gary Fleisher is the Managing Director and contributor to the Modcoach Network and its affiliated blogs.
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