Headlines of late abound with warnings of wage inflation, with employers forced to raise their hourly pay and even offer bonuses to entice workers reluctant to re-enter the job market. Such news translates to increased costs for contingent workforce programs.
The US saw a larger-than-forecast pickup in average hourly wages for a second straight month in June, caused by employers boosting pay or offering bonuses to lure staff due to a shortage of people willing to work at the going rate of compensation, according to Bloomberg.
Meanwhile, labor supply bottlenecks in the UK might add upward pressure on prices, warns Andy Haldane, chief economist of the Bank of England. Wages and inflation are playing a “game of leapfrog” (wage-price spiral) as workers demand higher pay to plug employers’ staffing gaps, he says.
Others don’t think the situation is quite so dire. Duncan Weldon, the UK economics correspondent at The Economist, says we are panicking and asserts wage growth and inflation are both below the pre-financial crisis norms. Sarah O’Connor, a Financial Times reporter focused on the world of work, reinforces this argument, explaining in a recent article why we are a long way from the pressures that led to the Statute of Laborers after the Black Death.
Still others argue that unemployment will keep down inflation. The International Labour Organization predicts the pandemic will cause a global employment shortfall of 75 million jobs this year. Nor does the organization expect the gap to be closed in 2022 when it reckons the world will still be short 23 million jobs.
Whether the difficulties we see are relevant to just some industries — hospitality, for example — or just some countries — the US is often mentioned — it is likely to take some time before we can see which argument is correct. In the meantime, SIA has collated data to help you see what has happened previously and what might happen going forward. This information can prove valuable as you plan your budgets and project costs for your program.
Charting Wage Averages
The “Wages and Inflation 2021” spreadsheet comprises three sheets of wage data. The first sheet — “OECD IMF Annual” — provides OECD Annual Average Wages data from 2000 through 2026 for 34 countries. Each country is represented on two lines. The top line is the annual average wage, which was derived by dividing the national-accounts-based total wage bill by the average number of employees in the total economy, which is then multiplied by the ratio of the average usual weekly hours per full-time employee to the average usually weekly hours for all employees. This indicator is measured in US dollar constant prices using 2016 as a base year and purchasing power parities (PPPs) for private consumption of the same year. The lower row per country shows a year-over-year percentage change by setting the annual average wage against International Monetary Fund data for average consumer prices. For years 2020-2026 (shown in green), we used Excel Forecast to calculate value predictions using linear regression.
In the second sheet, we also provide inflation figures from the International Monetary Fund — in the “IMF Inflation Other” sheet — for 160 countries for which there is no corresponding OECD to match it to 2026. The third sheet provides data from the International Labour Organization as well as the source and other relevant information. Look to column H for the average monthly earnings for 160 countries.
I hope these data points will help you understand what has happened in the past and chart a course for your program.