- Small businesses are raising wages and extending weekly work hours in the tight labor market to compete for talent, according to the August 2019 Small Business Employment Watch from Paychex and IHS Markit. The report also pointed to a national jobs index slip of 0.17% since the previous month, contributing to a 1.22% year-over-year decrease in job growth for small businesses, the companies said. The report draws on the payroll data of 350,000 Paychex clients.
- The August report found that hourly earnings growth was 2.75% for employees and 0.86% for business owners. Earnings growth for hourly employees was 3.55% and 1.92% for salaried workers in August. Leisure and hospitality is the top industry in hourly earnings growth at 4.54%, the report found.
- Regionally, the report showed that job growth declined across the board for small businesses. The South was the top region for small business employment growth in August, while the Northeast was the lowest-ranked region. Hourly earnings grew fastest in the West, and weekly earnings rose steadily each month in 2019 in the Northeast.
The talent shortage is driving the current rise in wages in organizations of all sizes, which, as the Paychex report showed, is particularly challenging for small businesses. Forty-five percent of employers in SunTrust's annual Business Pulse Survey said they've raised pay rates in the competition for talent. But pay increases were just one of a long list of costs; employers in the survey expanded benefits, trained workers to fill vacancies, provided new hires with upfront training and offered more recognition programs, college loan repayment or college savings programs to compete for talent.
An ADP report released in July showed that employers reacted to the talent shortage in much the same way as those in the Paychex report. According to the ADP Research Institute Workforce Vitality Report, wages grew 4% from the second quarter of 2018 to Q2 2019. Manufacturing and construction were largely credited for the relatively robust wage growth, according to ADP.