U.S. Wages Grew 2.8% in 2018, Should You Increase Staff Compensation?

2018 Wage Growth Statistics

Unemployment numbers have been at historic lows recently, and this is having a positive effect on the stagnant wages of the past decade. According to the ADP Research Institute Workforce Vitality Report (WVR), the fourth quarter of 2018 delivered year-over-year wage growth of 3.4% to end the year.

2018 Wage Growth Statistics

Overall, 2018 provided wage growth of 2.8% compared to 2.6% in 2017. The steady wage growth is being driven by a tight labor market as businesses are competing with a fewer number of qualified applicants for positions.

For small businesses, it means having to compete with large companies and the incentives they offer in terms of pay and other benefits. This has forced owners to raise wages as they continue to struggle in finding qualified talent.

Because of the tight labor market, ADP says job holders, job switchers, and entrants are seeing average wage growth of more than 4.5% on an individual basis.

However, workers are not moving as much. In the press release, Ahu Yildirmaz, co-head of the ADP Research Institute, said, “As the labor market sits at full employment, we continue to see an overall slowdown in job switching across the majority of industries.”

Yildirmaz goes on to say, the exception is the finance industry, which is seeing a high number of younger workers switching jobs in the segment. The WVR said 20.5% of US employees successfully switched their place of work in 2018.

The Workforce Vitality Report

The WVR provides a monthly analysis of the vitality of the US labor market with quarterly publications. The report gives decision makers an insight into market performance along with trends impacting different segments of the workforce.

It includes total employment growth; change in the hours worked by current job holders; wage level and growth; the job switching rate; the overall job turnover rate and more.

Fourth Quarter Results for 2018

The Q4 results for 2018 saw the average wage level go up by $0.93 to $28.06 an hour.

Industries in the education and health services were responsible for driving this growth as they represent 19% of the nation’s total workforce. For this group, the wage growth was 4.1% with an average hourly wage of $27.05.

The next largest group was trade with 22% of the workforce. And it saw a 4.4% wage growth with an average hourly wage of $24.56.

Regionally, the Northeast experienced the biggest gains with 3.7% in wage growth and an hourly wage of $31.75. But the West had the highest growth in employment at 2.7%.

Small Businesses

While there was good news overall, small businesses experienced a decrease in wage growth. Companies with 1-49 employees saw their wage growth and level go down by -2.1% compared to Q4 of 2017.

The report also revealed lower employment growth, while experiencing turnover rates of 69.9%. This data point could be indicating small businesses are losing their workforce to larger companies as employees look for better-paying jobs.

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Michael Guta Michael Guta is the Assistant Editor at Small Business Trends and currently manages its East African editorial team. Michael brings with him many years of content experience in the digital ecosystem covering a wide range of industries. He holds a B.S. in Information Communication Technology, with an emphasis in Technology Management.

One Reaction
  1. This will depend on the capability of your company and your skills as well. You’ll know when it is time to ask for compensation.